Renewable Energy Transition and Sustainable Economic Growth in South Asia: Insights from the CO2 Emissions Policy Threshold

This article examines the asymmetric effects of renewable energy on sustainable economic growth across six South Asian countries from 2000 to 2023, employing panel data and threshold regression analysis. The findings indicate that CO2 emissions must remain below a threshold of 2.38% to support the integration of renewable energy with sustainable growth. Furthermore, access to clean energy and technologies should exceed 3.38%, and urbanization must be managed at a complementary threshold of 3.21%. These results are consistent with various studies investigating the renewable energy transition’s economic impacts globally. It is recommended that South Asia focus on reducing CO2 emissions below the identified threshold, enhancing clean energy access and innovation above the designated thresholds, and supporting urban growth as part of its policy initiatives. Such actions are essential for fostering economic growth and ensuring the sustainability of the region. The study recommends that the South Asian region take decisive steps to reduce CO2 emissions and enhance access to clean energy while accommodating urban population growth. It highlights the importance of transitioning to renewable energy to stimulate economic growth and maintain trade and foreign direct investment (FDI) as a viable part of the gross domestic product. The study suggests that investments in Gross Capital Formation (GCF), trade, and FDI will yield long-term benefits, although short-term policy adjustments may disrupt resource allocation and hinder economic and renewable energy development. Future research should explore the complex interactions between CO2 emissions, clean energy access, FDI, and trade, particularly in light of recent trade policies, including U.S. tariffs. Investigating these relationships through advanced methodologies, such as machine learning, could provide valuable insights into drivers of renewable energy transition and economic outcomes.