An insight into the asymmetric effect of economic globalization on renewable energy in Australia: Evidence from the nonlinear ARDL approach and wavelet coherence

Abstract

Boosting energy consumption, ensuring energy supply security, and mitigating emissions are critical global concerns, especially during the surge in energy prices, continuous expansion in income level and persistent economic integration with other countries, and climate change. The existing evidence on the determinant of renewable energy is still in its early stages; however, there is currently limited empirical evidence regarding the determinant of renewable energy in Australia. Therefore, this study probed into the effect of the asymmetric effect of economic globalization on renewable energy usage in Australia, which prior studies in the literature have neglected. The study employed carbon emissions, economic growth, and oil price as other regressors. The dataset for the period spanning from 1970 to 2018 was analyzed using the nonlinear autoregressive distributed lag. Evidence from the empirical analysis reported that the positive variation in economic globalization has a positive and significant effect on renewable energy, thus the rise in economic globalization promotes renewable energy. Meanwhile, the negative variation in economic globalization has a neutral impact on renewable energy. Furthermore, economic growth and oil price positively and significantly affect the usage of renewable energy in Australia. Moreover, carbon emissions have a negative and significant effect on renewable energy. Furthermore, the wavelets coherence was also for the robustness test, which reports positive co-movement between all regressors and renewable energy, except for CO2 emissions (negative co-movement). Economic globalization, economic growth, and CO2 emissions drive renewable energy, while renewable energy leads to oil prices in Australia. This study offers significant and crucial suggestions to policymakers in Australia, emphasizing the need to prioritize environmental sustainability and promote economic globalization to foster the growth of the clean and efficient energy sector.