The causal links between green energy, uncertainty, remittances, FDI, and ecological footprint: Evidence using structural breaks and multiple wavelet approach

Abstract

Policies encouraging green energy adoption promote environmental sustainability, particularly in developing countries where the remittances boost household consumption. This research aims to empirically examine the impact of green energy, output, uncertainty, remittances, and Foreign Direct Investment (FDI) on the ecological footprint in Ecuador during 1990–2023. The research contributes to the green energy-environmental sustainability nexus debate by capturing the effect of external and internal shocks in the series and assessing the time–frequency dimension. This research is pioneering in examining the causal relationship between green energy, the uncertainty index, and the ecological footprint using combined cointegration and the multiple wavelet approach in the context of a remittance-dependent country. Notably, cointegration techniques with structural breaks, long-run elasticities using Dynamic Ordinary Least Square (DOLS), Fully Modified Ordinary Least Square (FMOLS), and Canonical Cointegrating Regression (CCR) models, partial and multiple wavelet analysis, and Fourier causality are used for estimation purposes. Accordingly, the results confirm cointegrating relationships in the presence of structural breaks among green energy, GDP, uncertainty, remittances, FDI, and environmental sustainability. Besides, it is found that output and uncertainty increase the ecological footprint, while remittances, FDI, and green energy reduce it. Hence, policymakers should consider remittances, FDI, and green energy as mechanisms to achieve Sustainable Development Goals (SDG) agenda so that environmental sustainability can be promoted in Ecuador.