The Role of Energy Mix (Coal, Renewables, Natural Gas) on Economic Growth and CO2 Emissions in Developing Countries

Abstract

Energy consumption plays a critical role in shaping economic growth and environmental outcomes, particularly in developing countries experiencing rapid industrialization and rising energy demand. This study examines the impact of the energy mix specifically coal, renewable energy, and natural gas consumption on economic growth and CO₂ emissions in developing countries. Using annual panel data from 30 developing countries over the period 2014–2023, the study employs a quantitative panel econometric approach, applying Pooled Ordinary Least Squares (POLS), Fixed Effects Model (FEM), and Random Effects Model (REM), with the Hausman specification test used for model selection. Economic growth is measured by GDP growth rate, while environmental impact is proxied by CO₂ emissions per capita. The empirical findings indicate that the composition of the energy mix significantly influences both economic growth and CO₂ emissions. Coal and natural gas consumption contribute positively to economic growth but are associated with higher CO₂ emissions, whereas renewable energy consumption supports economic growth with relatively lower environmental costs. These results highlight the importance of transitioning towards a cleaner energy mix to achieve sustainable growth. The study provides empirical evidence to inform energy and environmental policy in developing economies by emphasizing the need for a gradual shift from coal-based energy toward renewable energy, with natural gas serving as a transitional fuel.