The Impact of Human Capital, Natural Resources, and Renewable Energy on Achieving Sustainable Cities and Communities in European Union Countries

This study investigates the influence of human capital and natural resource productivity on achieving sustainable cities and society (SDG-11) within the European Union (EU) while also considering the contribution of renewable energy (RE). This research analyzes data from the European Union between 2011 and 2020 by deploying the first-difference generalized method of moments (FM-GMM) model to distinguish between two different effects of the human capital variable—a low effect (negative influence) and a high effect (positive influence). The analysis has identified an optimal threshold value of 1.867 for the human capital index (HCI) score in the context of European Union countries. This threshold value represents a critical point at which the effect of human capital on achieving SDG-11, which aims to make cities and human settlements inclusive, safe, resilient, and sustainable, undergoes a significant shift. The impact of renewable energy consumption on SDG-11 exhibits a non-linear pattern. There is a negative relationship at lower levels of renewable energy adoption (below a certain threshold), with renewable energy negatively impacting SDG-11 progress at a 1% significance level. However, the relationship becomes significantly positive once renewable energy consumption surpasses this threshold. This non-linearity suggests that achieving mass renewable energy adoption is crucial to unlocking its full potential in promoting the sustainable urban development goals captured by SDG-11. The results also demonstrate a positive effect on natural resource productivity both before and after exceeding a specific threshold, although the magnitude of this effect varies. This robust evidence underscores the necessity for targeted policies in the European Union to enhance human capital, increase renewable energy adoption, and boost natural resource productivity, thereby securing sustainable funding mechanisms for SDG-11.