The role of environmental protection expenditures and renewable energy consumption in the context of ecological challenges: Insights from the European Union with the novel panel econometric approach*

In line with the United Nations' sustainable development goals (SDGs), countries are taking action to achieve their carbon reduction goals. Because countries have limited financial resources, it is important for carbon reduction policies that public expenditure is used effectively. Researchers have neglected to probe the environmental quality in European Union countries by considering environmental protection expenditure and renewable energy consumption. This study expands the literature by investigating the impact of renewable energy consumption and environmental protection expenditure on the load capacity factor, which considers both the supply and demand directions of the environment. Hence, this work contributes to the SDG 7 (affordable and clean energy), SDG 6 (clean water and sanitation), and SDG 15 (life on land) targets of European Union-22 countries. The study uses the CS-ARDL approach, which considers cross-sectional dependence, endogeneity, and heterogeneity. Empirical analysis showed that environmental protection expenditure is insufficient for European Union economies. In addition, renewable energy consumption contributed to environmental quality. Based on the outcomes, European Union countries should allocate larger budgets from their general budgets for environmental protection. Policies that can attract the attention of the private sector and not just the public sector should be implemented.

Automated summary

In line with the United Nations' sustainable development goals (SDGs), countries are taking action to achieve their carbon reduction goals. Limited financial resources make it crucial for carbon reduction policies to make effective use of public expenditure. This study examines the environmental quality in European Union countries by considering environmental protection expenditure and renewable energy consumption, and finds that environmental protection expenditure is insufficient while renewable energy consumption contributes positively to environmental quality.