Economic growth and environmental impact: Assessing the role of geothermal energy in developing and developed countries

Abstract

Geothermal energy is both a clean and sustainable energy source that contributes to economic growth (GDP) and environmentally friendly, as it releases much less harmful greenhouse gas (GHG) emissions than fossil fuels. This study presents a novel perspective by examining the dynamic impact of geothermal energy on GDP and GHG emissions in both developing and developed countries from 2000 to 2019. By employing Autoregressive Distributed Lag (ARDL) estimations, our study demonstrates a negative impact of geothermal energy on short-run GDP but also proves to be a positive contributor to long-run GDP, particularly in developed countries. Additionally, our study unveils a noteworthy discovery that geothermal energy has a positive effect on GHG levels in both country groups over the long run, although the coefficient is lower in developed countries. These findings are robust and confirmed through Fully Modified Ordinary Least Squares (FMOLS) and Dynamic Ordinary Least Squares (DOLS) techniques. The ARDL findings are justified by the Dumitrescu Hurlin (D-H) causality model, indicating the existence of unidirectional causality from GHG emissions to geothermal energy. Based on this empirical evidence, we suggest policymakers support geothermal energy projects through streamlined processes, incentives, and ongoing policy reviews for environmental sustainability and economic growth.