How Renewable Energy and Digitalization Affect Co2 Emissions? The Mediating Role of Public Debt in Emerging Economies

Much study has been conducted on the factors influencing renewable energy consumption, and the emergence and fast expansion of digital technology as part of the digital economy provides huge prospects for carbon reduction on a global and emerging economies scale. Till now, research on the relationship between digital economy and CO2 emissions is in its early stages. Moreover, public debt may have an impact on CO2 emissions, renewable energy consumption, and digital economy, either directly or indirectly. As a result, the goal of this study is to investigate the role of public debt as a mediator between renewable energy and digital economy, as well as the following impact on CO2 emissions in emerging nations. To address this gap, we investigate the relationship between CO2 emissions, renewable energy, and the digital economy mediated by public debt in 20 emerging economies from 2003 to 2021. Utilizing a variety of methods to address the issue of cross-sectional dependency i.e. Westerlund panel cointegration test, Driscoll-Kraay robust standard errors estimates, and Dumitrescu-Hurlin causality test, our empirical findings show that renewable energy and digital economy decrease CO2 emissions. Contrarily, public debt has positive effect on CO2 emissions. It is also confirmed that the interaction terms between renewable energy and public debt, as well as the digital economy and public debt, reduces CO2 emissions. Moreover, renewable energy and digital economy have bidirectional causal relationship with CO2 emissions and public debt, whereas public debt has unidirectional causal relationship with CO2 emissions. Our research indicates that emerging economies should promote renewable energy and digitalization while maintaining a manageable level of public debt