Contents lists available at ScienceDirect Energy Policy journal homepage: www.elsevier.com/locate/enpol Energy innovation and renewable energy consumption in the correction of air pollution levels Agustin Alvarez-Herranz a , Daniel Balsalobre-Lorente b, ⁎ , Muhammad Shahbaz c , José María Cantos b a University of Castilla-La Mancha, Dept. of Spanish and International Economics, Econometrics and Economic History and Institutions, Spain b University of Castilla-La Mancha, Dept. of Political Economy and Public Finance, Economic and Business Statistics and Economic Policy, Spain c Energy and Sustainable Development, Montpellier Business School, Montpellier, France ARTICLE INFO JEL classification: Q41 Q55 Q56 032 Keywords: Environmental Kuznets curve Economic growth Energy RD & D Renewable energy ABSTRACT This study analyses the relationship between economic growth and environmental pollution. Specifically, it investigates the presence of an environmental Kuznets curve (EKC) in 17 OECD countries over the period of 1990–2012. The results confirm the existence of an N-shaped EKC relationship between income and environmental degradation. The study offers a novel methodological contribution that makes it possible to explain the environmental pollution process through the analysis of low-carbon technologies. This demonstrates how income levels affect energy consumption and how higher energy demand leads to a larger share of fossil sources in the energy mix and, thus, increased greenhouse gas (GHG) emissions. The effect on per capita GHG emissions is explored in a model containing a dampening variable that moderates the relationship between energy consumption and income. This empirical evidence helps to explain the interaction between energy regulation, economic growth and carbon emissions. This study also confirms the positive effect that energy innovation process exerts on environmental pollution. Finally, it is noted that renewable energy sources help to improve air quality. 1. Introduction Although the Club of Rome raised awareness of the need for economic systems to preserve environmental sustainability in the 1970s (Meadows et al., 1972), it was not until the early1990s that environmental pollution problems began to be more frequently ad- dressed in the theoretical economic literature (Grossman and Krueger, 1991; Shafik and Bandyopadhyay, 1992; Panayotou, 1993; Selden and Song, 1994). These studies proposed the existence of an inverted-U relationship between economic growth and environmental degrada- tion, which was studied through the empirical hypothesis of the environmental Kuznets curve (EKC). Increases in greenhouse gas (GHG) emissions, a fundamental problem for economic development, are encouraged by multiple variables, including economic growth, economic structure, energy dependency and energy efficiency (Velthuijsen and Worrell, 2002; Shi, 2003; Acaravci and Ozturk, 2010; Tugcu et al., 2012; Apergis and Ozturk, 2015; Ben Jebli et al., 2016; Mensah, 2014; Al-Mulali et al., 2016). In addition to the burden of environmental pollution, developed economies also face the problem of energy dependency and high energy intensity. Climate change can, in theory, be addressed by limiting production that uses fossil fuels and improving the efficiency with which such fuels are used. However, a key driver of emissions reductions will be induced product and process innovation (Aghion et al., 2014). Thus, not only are energy policy instruments associated with the reduction of fossil energy sources, but public budget on energy research, development and demonstration (RD & D), procedures to improve energy efficiency, and measures intended to increase the share of renewable sources in the energy mix have also become central in environmental policy programmes. The present study used an EKC model 1 to examine the impact that economic growth, technology innovation measures, and consumption of renewable energy sources have on the evolution of per-capita carbon emissions in a selection of 17 OECD countries (Fig. 1). The results of the regression, combined with economic growth, make it possible to determine the effectiveness of these energy measures in a context of sustainable economic growth. Moreover, the results facilitate the analysis of the importance of http://dx.doi.org/10.1016/j.enpol.2017.03.009 Received 29 November 2016; Received in revised form 2 February 2017; Accepted 3 March 2017 ⁎ Corresponding author. E-mail addresses: Agustin.Alvarez@uclm.es (A. Alvarez-Herranz), Daniel.Balsalobre@uclm.es (D. Balsalobre-Lorente), Shahbazmohd@live.com (M. Shahbaz), Josemaria.cantos@uclm.es (J.M. Cantos). 1 Austria, Canada, Denmark, Finland, France, Germany, Italy, Japan, Netherlands, New Zealand, Norway, Portugal, Spain, Sweden, Switzerland, United Kingdom, United States. Energy Policy 105 (2017) 386–397 0301-4215/ © 2017 Elsevier Ltd. All rights reserved. MARK