What proportion of renewable energy supplies is needed to initially mitigate CO 2 emissions in OECD member countries ?

In spite of increasing numbers of countries having established renewable energy development mechanisms for carbon dioxide (CO2) emissions reduction, the CO2 emissions problem continues to worsen along with the growth of the world economy. This leads us to examine the threshold effect of the proportion of renewable energy supply for CO2 emissions reduction by means of the panel threshold regression model (PTR). Economic growth and the price of energy are also both taken into account in the model in measuring the specific influence that each of them has on CO2 emissions. The empirical panel data encompass all 30member countries of the OECD and cover a period of about a decade in length from 1996 to 2005. Our empirical results provide clear evidence of the existence of a single threshold effect that may be divided into lower and higher regimes. Based on the specific estimates of the slope coefficients in each regime distinguished, we find that a renewable energy supply accounting for at least 8.3889% of total energy supply wouldmean that CO2 emissions would start to bemitigated. Furthermore, real GDP and the CPI of energy are significantly and positively and insignificantly and negatively correlatedwith CO2 emissions, respectively. These findings lead us to conclude that the authorities ought to enhance the proportion of renewable energy supply to more than 8.3889% of all energy supplied, which might help resolve the dilemma between economic growth and CO2 emissions. Realizing the effects of CO2 emissions reduction via energy price reforms or the levying of a carbon tax levy may, however, still remain a puzzle. 2008 Published by Elsevier Ltd.