Impact of fossil fuels, renewable energy consumption and industrial growth on carbon emissions in Latin American and Caribbean economies

Abstract

This study examines the impact of fossil fuels consumption, renewable energy use and industrial growth on carbon emissions in the developing economies of Latin America and the Caribbean. An industrial growth index is developed using competitive industrial indicators, and a two-step system generalized method of moments robust estimator is employed, involving a panel of 16 middle- and lower-middle-income economies for the period 1990 to 2015. The empirical results show an Inverted-U shaped relationship between economic growth and carbon emissions and confirm the existence of the environmental Kuznets curve for the region. The results indicate that industrial growth and consumption of fossil fuels are significantly contributing to carbon emissions in the region. The results highlight that, based on competitiveness in manufacturing and the transition from simple to sophisticated technologies, advance technology-based industrial growth increases the potential to produce goods competitively with lower carbon emissions. The findings suggest that such advanced industrial growth is unavoidable to attain sustainable economic growth. Thus, technological advancement and consumption of renewable energies have the potential to both meet the rising demand for goods and energy and to control carbon emissions in the developing countries of Latin America and the Caribbean.