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Threshold Effects of Renewable Energy Investment on the Energy Efficiency–Fossil Fuel Consumption Nexus: Evidence from 71 Countries

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  • Qing Chang

    (School of Energy and Mining Engineering, Xi’an University of Science and Technology, Xi’an 710600, China)

  • Xiangbo Fan

    (School of Energy and Mining Engineering, Xi’an University of Science and Technology, Xi’an 710600, China)

  • Shaohui Zou

    (School of Management, Xi’an University of Science and Technology, Xi’an 710600, China)

Abstract

As global focus on energy transition and carbon reduction grows, energy efficiency and renewable energy investment have become key policy tools. This study explores the nonlinear relationship between energy efficiency and fossil fuel consumption, emphasizing the threshold effect of renewable energy investment. Using panel data from 71 countries and a dynamic panel threshold model, the analysis reveals that at low renewable energy investment levels, energy efficiency improvements may be limited by the rebound effect, failing to significantly reduce fossil fuel consumption. However, once investment surpasses a critical threshold, energy efficiency begins to play a stronger role in reducing fossil fuel use. A heterogeneity analysis further shows that developed countries and those with carbon trading systems are more effective in leveraging energy efficiency for emission reduction. The findings highlight the need for synergistic policies combining renewable energy investment, carbon markets, and environmental regulations to accelerate the energy transition and achieve carbon neutrality.

Suggested Citation

  • Qing Chang & Xiangbo Fan & Shaohui Zou, 2025. "Threshold Effects of Renewable Energy Investment on the Energy Efficiency–Fossil Fuel Consumption Nexus: Evidence from 71 Countries," Energies, MDPI, vol. 18(8), pages 1-20, April.
    • Handle: RePEc:gam:jeners:v:18:y:2025:i:8:p:2078-:d:1637100
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