Does biofuel consumption improve environmental quality? An econometric analysis

This study seeks to investigate the interplay among environmental quality, biofuel consumption, non-renewable energy consumption, economic growth and urbanization in a panel of twenty-five OECD countries. Empirical outcomes reveal a positive and significant impact of economic growth, non-renewable energy consumption, and urbanization on environmental quality. The elasticity coefficient of biofuel consumption coefficient is negative and significant, implying an increase in its consumption will improve environmental quality. Panel causality test results divulge both short-run and long-run causality among the variables under consideration. Therefore, results infer that a reduction in the consumption of non-renewable and substitution with renewables will significantly impact the quality of the environment in these countries. This study suggests the sustainable use of biofuels as they are secure, efficient, environmentally justifiable, and economically viable sources of energy. This study has significant policy implications that can help understand the dynamic relationship between the analyzed variables and guide policymakers to devise policies grounded on the analyzed variables.