Threshold Effects of Renewable Energy Investment on the Energy Efficiency–Fossil Fuel Consumption Nexus: Evidence from 71 Countries

Qing Chang, Xiangbo Fan and Shaohui Zou ()
Additional contact information
Qing Chang: School of Energy and Mining Engineering, Xi’an University of Science and Technology, Xi’an 710600, China
Xiangbo Fan: School of Energy and Mining Engineering, Xi’an University of Science and Technology, Xi’an 710600, China
Shaohui Zou: School of Management, Xi’an University of Science and Technology, Xi’an 710600, China

Energies, 2025, vol. 18, issue 8, 1-20

Abstract: As global focus on energy transition and carbon reduction grows, energy efficiency and renewable energy investment have become key policy tools. This study explores the nonlinear relationship between energy efficiency and fossil fuel consumption, emphasizing the threshold effect of renewable energy investment. Using panel data from 71 countries and a dynamic panel threshold model, the analysis reveals that at low renewable energy investment levels, energy efficiency improvements may be limited by the rebound effect, failing to significantly reduce fossil fuel consumption. However, once investment surpasses a critical threshold, energy efficiency begins to play a stronger role in reducing fossil fuel use. A heterogeneity analysis further shows that developed countries and those with carbon trading systems are more effective in leveraging energy efficiency for emission reduction. The findings highlight the need for synergistic policies combining renewable energy investment, carbon markets, and environmental regulations to accelerate the energy transition and achieve carbon neutrality.

Keywords: energy efficiency; renewable energy investment; fossil fuel consumption; threshold effects; dynamic panel threshold model (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.mdpi.com/1996-1073/18/8/2078/pdf (application/pdf)
https://www.mdpi.com/1996-1073/18/8/2078/ (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gam:jeners:v:18:y:2025:i:8:p:2078-:d:1637100

Access Statistics for this article

Energies is currently edited by Ms. Agatha Cao

More articles in Energies from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().