Reviewing the EKC hypothesis: Does renewable energy reduce carbon emissions and environmental-economics impact?

Drawing on the theoretical concepts of the Environmental Kuznets Curve (EKC), this paper analyzes the effects of renewable energy on carbon emissions and environmental status in Malaysia. The EKC makes the hypothesis that a country’s environmental condition deteriorates as it grows economically but improves when the country reaches a certain level of economic development. We employ ARDL & FMOLS techniques to examine such relationships for data covering the period from 1985 to 2020. Governments of the different implementing countries also put several policies into practice during this period, but these faced some challenges. Renewable energy sources will only grow when the public gives their approval. The usage of renewable energy is determined by the measure of convenience that the technology provides as well as the practical utility when embraced by the people. That is why reducing the cost of renewable energy in general and for the consumer in particular is critical. Measures should also be instilled on issues that may do with the public concern with renewable energy policies. Based on the first stage of EKC in the case of China, we establish that energy consumption has a positive effect on carbon emissions. But as Malaysia’s economy advances, clean electricity such as hydro, solar, and biofuels are playing a major role in cutting emissions. That supports the EKC’s further stage where the increase in per capita income is linked with the improvement of environmental conditions. Our analysis reveals that streamlining policies such as feed-in tariffs and the Renewable Energy Act 2011 have been important in enhancing clean electricity in China. Though at the moment many countries rely on the usage of fossil fuels, renewable energy is a promising way to decrease the negative impact on the environment. As a last note, it emerges that the current research supports the argument that financial subsidies for renewable energy resources in China should be sustained. This appeared to be the thinking for addressing problems such as pollution, poor standard of living, and sustainability of the environment.