Entrepreneurial activity and environmental quality: a dynamic environmental kuznets curve analysis

Purpose This study investigates how various dimensions of entrepreneurship affect environmental sustainability, with a specific focus on their influence on CO2 emissions. It also evaluates the effectiveness of renewable energy sources in mitigating emissions within the broader context of entrepreneurial dynamics. Design/methodology/approach Using panel data from 14 countries spanning the years 2002–2019, the study employs the panel smooth threshold regression (PSTR) model to capture the non-linear and dynamic relationships between entrepreneurship indicators and environmental outcomes. Ten entrepreneurship indicators are examined alongside renewable energy variables to assess their combined impact on CO2 emissions. Findings The analysis identifies a modified dynamic Kuznets curve driven by entrepreneurship indicators, which intensifies the relationship between production scale and emissions. This dynamic accelerates progress toward the Kuznets curve peak through improved energy efficiency. Additionally, entrepreneurship moderates the typically positive effect of energy intensity on emissions and reduces the negative impacts of trade openness and urbanization. Interestingly, the results also reveal a paradoxical increase in CO2 emissions associated with shifts in the renewable energy mix, suggesting unintended consequences in the current energy transition. Originality/value This study contributes to the literature by integrating entrepreneurship into the environmental Kuznets curve framework through a novel PSTR modeling approach. It provides nuanced insights into the role of entrepreneurship in shaping environmental outcomes and offers practical implications for policymakers aiming to design sustainability strategies that harness the potential of entrepreneurial activity.