The environmental issue facing asymmetric oil price shocks and renewable energy challenges: evidence from Tunisia

Abstract

The present paper investigates the environmental issue in Tunisia when considering both renewable energy challenges and asymmetric oil prices shocks. The nonlinear ARDL (NARDL) approach to cointegration of Shin et al. (2014) in the presence of structural breaks is used to study the environmental Kuznets inverted U-curve in Tunisia over the period 1976–2014. The EKC hypothesis is found to be confirmed in Tunisia in the short and long terms. The nonlinear turning point is found to take place before the linear one suggesting that considering oil price asymmetrically allows accelerating the EKC assumption in Tunisia to reach the turning point more rapidly. Our finding reflects the necessity of an asymmetric energy price reform in Tunisia respecting the asymmetric nature itself of environmental and economic implications of oil price shocks. By switching from the linear to the nonlinear model, renewable energy consumption is found to exert almost the same and effective role as reducer of CO2 emissions. The energy transition process is found to be triggered in Tunisia but at a slow pace. Policy implications have been implemented in terms of environmental, social equity, and energy transition strategies. The issues raised are multidimensional including regulatory, institutional, financial, and governance reforms.