Renewable and non-renewable energy shocks and environmental sustainability in Nigeria: a nonlinear analysis

Despite Nigeria’s simultaneous reliance on fossil fuels for growth and efforts to promote renewable energy, there is limited understanding of whether shocks to these contrasting energy sources influence environmental sustainability in asymmetric ways. This study examines whether positive and negative changes in renewable and non-renewable energy consumption have differing effects on environmental outcomes. Utilizing annual data from 1994 to 2023, the Nonlinear Autoregressive Distributed Lag (NARDL) model was employed, with environmental sustainability proxied by the Load Capacity Factor (LCF) and the Environmental Performance Index (EPI). The results revealed significant asymmetric effects that varied by energy type, time horizon, and environmental indicator. In the LCF model, positive shocks to non-renewable energy significantly reduced environmental sustainability in the long run, while negative shocks to renewable energy also unexpectedly degraded LCF. In the EPI model, only negative shocks to renewable energy produced a significant positive effect on environmental performance, whereas positive shocks remained insignificant. Wald tests confirmed the presence of asymmetry for renewable energy in the short run and for non-renewable energy in the long run. These findings contradict conventional expectations and highlight the need for targeted policies addressing energy mix composition, institutional quality, and technological efficiency to achieve environmental sustainability in Nigeria.