Economic growth, energy transition and CO2 emissions in the Balkans: A quantile and causality analysis

Abstract Controversies surrounding CO 2 emissions in the Balkans revolve around the region's reliance on coal, slow adoption of RES, struggles to meet EU environmental standards, the health impacts of pollution, foreign investments in fossil fuel infrastructure, the environmental consequences of hydropower, and corruption in the energy sector. These issues are deeply intertwined with the region's economic challenges and its efforts to balance immediate needs with long-term environmental sustainability. The analysis covers the 25th, 50th (median), and 75th quantiles to capture the varying impacts across different levels of the dependent variable. The results show that GDP positively affects CO 2 emissions across all quantiles, with the coefficient decreasing from 0.59 at the 25th quantile to 0.35 at the 75th quantile. Renewable energy consumption (RENC) negatively influences CO 2 emissions across all quantiles, with a coefficient of −0.60 at the 25th quantile and −0.58 at the 75th quantile, highlighting the potential of RES in reducing emissions. Foreign direct investment (FDI) positively impacts emissions, but is significant only at the 50th and 75th quantiles. Fossil fuel consumption (FF) is a significant driver of CO 2 emissions across all quantiles, with the highest coefficient of 0.68 at the 75th quantile. The Dumitrescu-Hurlin causality test reveals bidirectional causality between GDP and CO 2 emissions, supporting the feedback hypothesis. There is also a significant bidirectional relationship between urbanization (URB) and CO 2 emissions, as well as between CO 2 and FDI. RENC is found to cause GDP, while FF causes GDP and CO 2 emissions.