Revisiting the environmental Kuznets curve in Hungary with asymmetric evidence

This study investigates the nonlinear and asymmetric effects of economic growth, renewable energy consumption (RENC), and foreign direct investment (FDI) on CO2 emissions in Hungary from 1990 to 2023. Using both ARDL and NARDL models, the results confirm an N-shaped Environmental Kuznets Curve (EKC), indicating that CO2 emissions initially decline with economic growth, then increase at intermediate stages of development, and eventually fall again at advanced levels. The estimated GDP turning points occur at approximately 8.65 and 9.97 (in logarithmic form), marking the transitions between the declining, rising, and final downward phases of the EKC, respectively. A 1% increase in RENC reduces CO2 emissions by 0.22%, whereas a 1% decrease in RENC leads to a significantly larger 1.13% increase in emissions, highlighting a pronounced asymmetry. These results stress the importance of maintaining continuous growth in renewable energy to prevent environmental setbacks. The effects of FDI are also asymmetric. Positive FDI shocks have no significant long-term effect, but a 1% reduction in FDI increases CO2 emissions by 0.02%, suggesting that declining foreign investment can undermine environmental performance, likely due to reduced access to cleaner technologies and capital. Dynamic multiplier analysis reveals that CO2 emissions respond more strongly to negative shocks in RENC and FDI than to positive ones. Our findings prove that effective climate action in emerging economies requires not only economic transformation but also institutional resilience to sustain renewable energy expansion and environmentally responsible investment flows in the face of global volatility.