Examining the asymmetric link between clean energy intensity and carbon dioxide emissions: The significance of quantile-on-quantile method

Abstract

This study corroborates the asymmetric and heterogeneous associations between clean energy intensity (CEI) and carbon dioxide (CO₂) emissions among the world's top ten renewable energy consumer countries using quarterly data from 1970Q1 to 2018Q4. We quantify the complete dependence structure between CEI and CO₂ at quantile distributions using a novel quantile-on-quantile (QQ) method proposed by Sim and Zhou (2015). Compared to classic approaches such as quantile regression and ordinary least squares, the QQ technique can provide more information on the overall relationship between CEI and CO₂. Furthermore, we also seek to determine causal relationships between CEI and CO₂ using a quantile Granger causality approach suggested by Troster. According to our empirical evidence, the link between the two variables is predominantly negative. Moreover, there are significant disparities across countries in the quantile ranges of CEI and CO₂. In particular, there is a weak positive link between CEI and CO₂ in the case of Sweden, Italy, Japan, and Australia, which may be because CEI has a minimal direct influence on CO₂ in these countries. The empirical findings clarify that policymakers should fund renewable energy industries to minimize carbon dioxide (CO₂) emissions and achieve Sustainable Development Goals (SDGs).