Biomass energy, technological progress and the environmental Kuznets curve: Evidence from selected European countries

• Examination of the causal relationship between economic growth and CO2 emissions in European countries.
• Utilize pooled mean group estimations in a dynamic heterogeneous panel setting.
• There is an inverted U-shaped relationship between CO2 emissions and economic growth.
• Technological innovation significantly facilitates reduction of CO2 emissions.
• This study provides new insights for policy makers for a sustainable economic development.

We examine the causal relationship between economic growth and CO2 emissions in a panel of 24 European countries from 1980 to 2010. Using an analytical framework that considers pooled mean group estimations in a dynamic heterogeneous panel setting, we show that there is an inverted U-shaped relationship between CO2 emissions and economic growth in the long run and that there is no such relationship in the short run. In particular, we find that biomass energy is insignificantly linked to CO2 emission. However, technological innovation significantly facilitates reduction of CO2 emissions in the investigated countries. Altogether, our study implies that economic growth and environmental quality can be achieved simultaneously, which opens up new insights for policy-makers for sustainable economic development via implementation of renewable energy consumption through technological innovation.