Can nuclear energy fuel an environmentally sustainable economic growth? Revisiting the EKC hypothesis for India

Abstract

The transition towards a modern cleaner energy pathway has been receiving global attention recently. Although nuclear energy has emerged as an alternative cleaner energy source and is receiving immense policy attention, however, the role of nuclear energy in the environmental degradation mitigation remains inconclusive in the extant literature. Therefore, this study examines the dynamic linkages between gross domestic product, foreign direct investment inflows, nuclear energy consumption, trade openness, and CO₂ emissions for India within the environmental Kuznets curve framework over the period 1978-2019 through various robust econometric models that takes into consideration the presence of structural break in the data. The present study confirms the existence of an "inverted N shape" environmental Kuznets curve, a phenomenon rarely observed in environmental Kuznets curve literature for India. Besides, the predicted turnaround points of environmental Kuznets curve highlight that India has already reached the positive peak approximately by the year 2015. The empirical findings also confirm the existence of a J-shaped relationship between foreign direct investment inflows and CO₂ emissions, which indicates that India is in the transient phase moving from pollution halo towards pollution heaven with progressive foreign direct investment development. Trade openness is also found to have a beneficial effect on environmental quality implying the trade policy of India encourages green trade activities to safeguard the environment. The empirical results also reveal the beneficial effect of nuclear energy consumption on air quality, thereby suggesting an accelerated adoption of nuclear energy in the Indian energy mix. The results also highlight that nuclear energy adoption in this booming phase can facilitate a "tunnelling effect" for sustainable economic growth for India. Hence, these findings may provide key policy recommendations regarding energy transition and environmentally sustainable economic growth.

Keywords: CO2 emissions; EKC; Energy policy; FDI; India; Nuclear energy.