The role of renewable and nuclear energy R&D expenditures and income on environmental quality in Germany: Scrutinizing the EKC and LCC hypotheses with smooth structural changes

This study analyzes the effect of renewable energy research & development (RRD) and nuclear energy research & development (NRD) expenditures on environmental quality by considering Germany’s goal of achieving carbon neutrality until 2045. Hence, the study uses various environmental indicators (carbon dioxide (CO2) emissions, ecological footprint-EF, and load capacity factor-LCF) to investigate the effects of RRD and NRD on the environmental quality controlling also a gross domestic product (GDP) and test the validity of the environmental Kuznets curve (EKC) and recently proposed load capacity curve (LCC) hypotheses. Also, the study includes yearly data from 1974 to 2018, uses fractional frequency Fourier autoregressive distributive lag (FADL) based FMOLS approach as the main model, and applies FADL based DOLS approach and Fourier wavelet causality test for the robustness. The empirical results reveal that (i) the explanatory variables have a cointegration link with CO2 emissions and EF; (ii) the EKC hypothesis is valid for Germany, while the LCC hypothesis is invalid; (iii) RRD expenditures are effective only in reducing CO2 emissions; (iv) RRD and NRD expenditures have no significant effect on the EF. Considering the results, German policymakers could utilize RRD more effectively and efficiently to improve environmental quality and reduce the EF. In this way, Germany could achieve its carbon neutrality goal until the middle of the century by benefiting from RRD facilities.