Effects of renewable energy on economy and carbon emission: A comparative analysis on the cases of the United States and China

This thesis investigates the dynamic relationships between renewable energy consumption, economic growth, and carbon emissions in the economies of China and the United States (USA). Using annual data from 1965 to 2023, the stationarity of the variables was tested, and both short- and long-term relationships were analyzed through the Autoregressive Distributed Lag (ARDL) bounds testing approach. According to the results for China, in the short run, a 1% increase in economic growth leads to a 0.02% decrease in renewable energy consumption, while a 1% increase in carbon emissions causes a 0.12% significant increase in renewable energy use. In the long run, these effects become more pronounced: a 1% increase in economic growth reduces renewable energy consumption by approximately 0.54%, whereas a 1% increase in carbon emissions raises renewable energy consumption by 2.79%. These findings suggest that while economic growth may initially constrain renewable energy use, rising carbon emissions promote awareness and investments in cleaner energy sources in both the short and long term. For the USA, the long-run analysis reveals that a 1% increase in GDP leads to a 4.00% decrease in renewable energy consumption. However, the long-term effect of carbon emissions on renewable energy is statistically insignificant. In the short run, a 1% increase in economic growth results in a 1.36% decline in renewable energy consumption, and again, the effect of carbon emissions is found to be insignificant. These results highlight the structural differences in the energy transition pathways of both countries. While China still relies heavily on carbon-intensive production, the USA exhibits a more diversified and institutionalized energy structure. The integration of carbon emission trends into renewable energy policy remains crucial for achieving long-term sustainability goals in both nations.