The impact of globalization processes on environmental performance and the role of renewable energy: A smooth transition panel regression approach

This study aims to estimate the impact of economic globalization on environmental quality and to determine the role of renewable energy in this impact. For this purpose, renewable energy is considered in two separate models as two separate variables in the context of both production and consumption, and the findings obtained are compared with each other. For this purpose, the annual data of the top 5 countries (Sweden, Switzerland, Norway, France, and Denmark), which have the best performance according to the Global Green Economy Index 2022 report, and Turkey are used for the period 1976-2021. The data of these countries are analyzed with the Panel Smooth Transition Regression model in order to capture the non-linear dynamics between the variables. With this nonlinear approach, the relationship between globalization and environmental pollution is divided into homogeneous regimes depending on the level of production and consumption of renewable energy (threshold variable), and regime-specific interpretations are made. According to the empirical findings, there is a three-regime nonlinear relationship between economic globalization and environmental pollution in the first model, where the threshold variable is renewable energy consumption. In the second model, where renewable energy production is the threshold variable, this nonlinear relationship is transformed into a two-regime relationship. In both models, economic globalization is initially found to be a factor that negatively affects environmental sustainability. However, it is found that this effect changes positively when renewable energy exceeds a certain threshold level in the context of production or consumption. As a result, this study, which shows that renewable energy plays a critical role in the relationship between economic globalization and environmental performance, provides policy recommendations on the steps to be taken for countries to achieve their environmental sustainability goals.