The role of industrial sectors, including construction (CONS) and manufacturing (MFG), in mitigating carbon dioxide (CO2) emissions is often overlooked. The response of these indicators in environmental sustainability is gaining critical attention among scholars and policymakers. Therefore, this research aims to address this issue by investigating the impact of nonrenewable energy consumption (NREC) under the moderating effects of CONS and MFG on Canada's CO2 emissions from 1980 to 2021, utilizing both traditional autoregressive distributed lags (ARDLs) and dynamic ARDL simulation methods. The findings reveal that NREC, CONS, and economic growth (GDP) are significant drivers of emissions in both the short and long run. Meanwhile, MFG reduces emissions in the long run with no significant short-run impact. Further analysis using Generalized Kernel-based regularized least squares (gKRLS) and frequency domain causality (FDC) tests confirmed these results. Moreover, examining the moderating role of CONS and MFG exhibits significant long-run positive moderating effects on the NREC-CO2 relationship, with MFG having a more substantial impact than CONS. However, both sectors show insignificant adverse moderating effects in the short run. Robustness analysis using quantile regression (QREG) and simultaneous quantile regression (SQREG) demonstrates that GDP and MFG consistently mitigate CO2 emissions across all quantiles, with stronger effects at higher emissions levels. These results underscore the importance of targeted renewable energy policies that balance economic growth with environmental sustainability.
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