Assessing the spillover effects of various forms of energy on CO₂ emissions - An empirical study based on dynamic...

Previous studies ignored the geospatial dynamics spillover effects of energy consumption on CO₂ emissions while assessing such impacts in developed and developing countries. Moreover, most studies wrongfully assess spillover effects in its aggregated format rather than decomposing by its components. This is important as not all energy sources share the same characteristics. We fill these gaps in the literature by investigating the spillover effects of various forms of energy, including fossil fuels, renewable energy, and nuclear power, on CO₂ emissions in 135 developed and developing countries from 2000 to 2019. We used the Dynamic Spatial Durbin Model (DSDM) to better understand the results. A series of indicative tests confirmed using the DSDM model and including spatial interaction of CO₂ emissions in the analysis. Our findings show evidence of indirect spillover effects of the various energy sources on CO₂ emissions. Further considering the spillover effects of the energy sources of neighbouring countries, the paper finds that the driving increase in CO₂ emissions mainly came from the energy consumption of the country itself and neighbouring countries' energy consumption. Nevertheless, the results indicate that the direct effects of energy consumption often exceed its indirect effects. The results also confirm that total and fossil energy consumption harms the environment, whereas adopting renewable and nuclear energy sources reduces CO₂ emissions. Lastly, we find nuclear energy is the most environmentally sustainable energy source. The study concludes that the Dynamic Spatial Durbin Model is paramount in estimating the environmental impact of energy consumption in our sample. The practical policy implications drawn from this study could be used to promote increased collaboration to hasten the energy transition process and address global warming and climate change.