How do renewable energy consumption, financial development, and technical efficiency change cause ecological sustainability in European Union countries?

Abstract

Achieving ecological sustainability is a critical issue of the current era, and researchers are striving to find viable solutions for sustainable development and ecological wellbeing. This study is an effort to examine the ecological consequences of renewable energy (REC), financial development (FD), and technical efficiency (TE) in 27 countries of the European Union (EU), time ranges from 1980 to 2018. We used second-generation econometric techniques to consider the cross-sectional dependency in the model and the CS-ARDL method to estimate the long-run dynamics of the variables. The Westerlund cointegration technique confirmed the long-run association among REC, FD, TE, and ecological footprint (EF). Furthermore, CS-ARDL results revealed a positive influence of FD on EF, indicating FD is a significant contributor to the ecological footprint of the EU. However, REC and TE promote ecological sustainability in the EU, as both factors negatively affect the EF. Furthermore, the interaction of FD and TE is also estimated to mitigate EF in sample countries. The study recommends that government policies in EU countries must be skewed towards promoting renewable energy usage, lending in green and energy-efficient technology, and technological advancement in the production process.