Does economic policy uncertainty, nuclear energy, and crude oil influence CO2 emissions? A sectoral growth analysis on G20 countries

Abstract

The G20 nations collectively accounted for a significant portion of global CO₂ emissions due to their vast economies and rising energy demand. While some G20 nations have made substantial efforts to reduce their emissions through policies such as renewable energy incentives and carbon pricing, others may still heavily rely on fossil fuels for energy production and industrial processes. Therefore, this recent study endeavoured to investigate the relationship between nuclear energy consumption (NEC), crude oil (CO), and economic policy uncertainty (EPU) with CO₂ emissions in three economic sectors of G20 nations. Despite voluminous research work conducted on mitigating CO₂ emission, to the best of our understanding, this paper marks the inaugural endeavour to investigate the impact of the afore-mentioned variables in a three-sector model with emission across G20 countries. To achieve this objective, we carried out a range of examinations, encompassing panel unit root and cointegration tests, followed by panel DOLS, ARDL, and the Dumitrescu-Hurlin causality test, spanning the period from 1990 to 2022. The findings trace that agricultural growth reduces CO₂ emissions, while manufacturing and service sector growth increases CO₂ emissions in both the short and long run. The panel ARDL analysis shows that CO leads to an increase in carbon emissions in the short term, whereas NEC contributes to a reduction in emissions. In terms of the synergy between NEC and EPU, it is noteworthy to mention that the collective impact of increase in NEC and decrease in EPU reduces the emission in three sectors. Nevertheless, in the long term, EPU exhibits a negative correlation with emissions across three sectors. Hence, the current research proposes waning EPU as a deliberate strategy to reduce emissions under careful consideration of its potential effects and feasibility within broader economic and policy contexts.