Green Investments, Energy Transition and Sustainable Economic Growth: Evidence From the USA and China

ABSTRACT

This study examines the short‐ and long‐run relationships among green investment, energy transition indicators, and economic growth in the USA and China within the framework of a Vector Error Correction Model, using annual data for the period 1990–2023. The findings indicate that long‐run relationships differ between the two countries. While the green investment indicator exhibits a positive long‐run relationship with real GDP per capita in the USA, the estimated cointegration relationship for China is negative. Gross fixed capital formation emerges as one of the key determinants of economic growth in both countries. Findings related to renewable energy production also differ across countries, suggesting that the effects of the energy transition on economic growth depend on country‐specific structural conditions. In addition, the impulse‐response analysis reveals that green investment shocks generate country‐specific dynamic effects on economic growth and carbon emissions. Overall, the findings suggest that the effects of green investments on economic growth may vary depending on institutional structure, the policy framework, and the pace of the energy transition.