Does renewable energy matter in the effect of economic globalization on environmental sustainability? Evidence from the PSTR approach

The environmental effects of economic globalization have gained increasing scholarly attention. This study examines the impact of economic globalization on environmental sustainability using two models that incorporate renewable energy consumption and production dynamics. The analysis covers the five top-performing countries in the 2022 Global Green Economy Index along with Türkiye, using annual data from 1976 to 2021. A Panel Smooth Transition Regression model is applied to capture nonlinear interactions. Results indicate a three-regime nonlinear relationship in the consumption model and a two-regime structure in the production model. In both models, economic globalization exerts pressure on environmental sustainability. However, when renewable energy shifts to a high-consumption or high-production regime, this adverse effect diminishes. These findings suggest that renewable energy mitigates the environmental impact of globalization. Additionally, the Dumitrescu-Hurlin panel causality test confirms both the direct and indirect effects of globalization on ecological footprint via renewable energy. The study highlights the critical role of renewable energy in the globalization–environment nexus and offers policy recommendations for achieving sustainability goals.