Twin Transition in G20 Economies: Macroeconomic Performance and Environmental Quality
Abstract
This study investigates the impact of the "twin transition" process, encompassing digitalization and green energy, on environmental quality. It focuses on discussions in the literature, such as the "Rebound Effect" and the "Pollution Haven Effect." The main objective of the study is to demonstrate the impact of the twin transition on carbon emissions (CO₂) in G20 countries. Methodological limitations in the literature have been addressed in this process. Panel data analysis was performed on 19 G20 countries using the second-generation CS-ARDL (DCCE) method, which considers cross-sectional dependence and common shocks, for the years 2005-2023. The findings revealed a long-term cointegration relationship between the variables. A potential macroeconomic shock takes 2-3 years to reach equilibrium. However, in the long term, it was found that digitalization and renewable energy investments did not statistically significantly reduce carbon emissions in G20 countries. This result is considered a reflection of the "rebound effect" discussed in the literature. The increase in energy demand is being met by fossil fuels, leading to "carbon lock-in." In addition to these findings, it has been observed that short-term foreign direct investment increases CO₂ emissions. This finding also demonstrates the validity of the "pollution haven hypothesis" in G20 countries.
Keywords
twin transition, G20 countries, CS-ARDL, environmental quality, macroeconomics
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