Investigating the dynamic effects of service value added on CO2 emissions: Novel insights from a non-parametric approach.

ABSTRACT

Carbon dioxide (CO2) emissions are the primary contributors to climate change. Addressing and mitigating climate change necessitates the effective management and utilization of renewable energy consumption, which poses a substantial challenge for the forthcoming decades. This study explores the dynamic effects of service value added (SVA) and renewable energy on environmental quality, particularly focusing on CO2 emissions. Unlike previous studies, we employ a non-parametric modeling approach to uncover the time-varying influence of service sector growth on CO2 emissions. Specifically, we apply the local linear dummy variable estimation (LLDVE) method to a panel of the 17 highest-emitting nations over the period 1980-2021. Our study uncovers a non-linear relationship between CO2 emissions and SVA. From 1980 to 2003, we observe a negative correlation. However, starting from 2005 to 2020, we witness a shift towards a positive correlation, indicating a rise in energy consumption within the service sector. The results indicate that significant emitter economies have yet to achieve sustainability, with the service sector continuing to contribute to pollution. Addressing this issue necessitates more robust climate change policies and increased investment in clean energy, specifically targeting the service sector, including buildings and transport.