Wavelet analysis of impact of renewable energy consumption and technological innovation on CO2 emissions: evidence from Portugal

Abstract

This paper uncover a new perception of the dynamic interconnection between CO2 emission and economic growth, renewable energy use, trade openness, and technological innovation in the Portuguese economy utilizing innovative Morlet wavelet analysis. The research applied continuous wavelet transform, wavelet correlation, the multiple and partial wavelet coherence, and frequency domain causality analyses are applied on variables of investigation using dataset between 1980 and 2019. The result of these analyses disclosed that the interconnection among the indicators progresses over time and frequency. The present analysis finds notable wavelet coherence and significant lead and lag interconnections in the frequency domain, while conflicting relationships among the variables are found in the time domain. The wavelet analysis according to economic viewpoint affirms that renewable energy consumption helps to curb CO2 while trade openness, technological innovation, and economic growth contribute to CO2. The outcomes also proposed that renewable energy consumption decreases CO2 in medium and long run in Portugal. Therefore, policymakers in Portugal should stimulate investment in renewable energy sources, establish restrictive laws, and enhance energy innovation.