Renewable Energy, Natural Resources, and Low-Carbon Transitions in the G7 Countries: Revisiting the Environmental Kuznets Curve and the Pollution Halo-Haven Hypotheses
Abstract
This study investigates the relationships among renewable energy, natural resources, economic growth, foreign investment, and carbon emissions in the G7 countries to better understand the drivers of low-carbon transition in advanced economies. Using annual data from 1990 to 2019, the study re-examines the environmental Kuznets curve (EKC) and the environmental effects of foreign direct investment within an integrated analytical framework. The analysis applies panel estimation techniques that account for cross-country dependence, heterogeneity, and nonlinear emission dynamics across different carbon-emission levels. Results reveal heterogeneous nonlinear EKC dynamics, with the method-of-moments quantile regression estimates providing stronger evidence of an N-shaped relationship in several emission quantiles. Renewable energy consumption consistently mitigates emissions across all quantiles, while natural resource rents intensify them. FDI exhibits a nonlinear pattern, initially supporting pollution-haven effects but transitioning toward pollution-halo outcomes as environmental standards and clean technologies strengthen. Agricultural activity has a moderate impact, mainly at mid-emission levels, and human capital exerts a weak but negative influence, reflecting its indirect contribution to cleaner production and innovation. The findings emphasize that expanding renewable energy, improving resource efficiency, attracting green FDI, and investing in human capital are critical to achieving sustainable, low-carbon development in the G7 countries.