The Effect of Economic Growth, Investment and Unemployment on Renewable Energy Transition: Evidence from OECD Countries

Abstract In today's world, where the dramatic effects of climate change continue to increase, it is critical to turn from fossil fuels to renewable energy sources to achieve the CO2 emission reduction targets that countries have committed at the Paris Climate Agreement and COP 27 conference. This study analyzes the effects of macroeconomic factors, including economic growth, investments, and unemployment, on the transition to renewable energy in OECD countries. From 1996 to 2020, long-run relationships between variables were examined using advanced econometric methodologies for empirical analysis. For this purpose, panel data analysis, second-generation panel unit root tests, cross-sectional dependence tests, and panel cointegration tests were applied. Economically, in the long run, according to Panel CCEMG and AMG estimator, while economic growth enhances the renewable energy transitions, investment does not statistically promote an impact on the renewable energy transitions. Renewable energy transition increases with unemployment. Moreover, the role of the considered variables in the renewable energy transition varies among country-specific. Within the framework of the results obtained, it has been proven that before determining policies for renewable energy transformation, it is necessary to do the necessary groundwork in the economy to increase economic growth and investments and reduce unemployment. JEL Classification: O11, Q43, Q42