Does economic complexity drive energy efficiency and renewable energy transition?

Abstract

This global study examines the role of economic complexity in achieving energy efficiency and renewable energy transition in 94 countries, putting the level of economic development into perspective. The panel quantile regression technique is applied to examine the nexus across the conditional distribution of the dependent variables. We find that, on a global perspective, economic complexity impedes both energy efficiency and renewable energy transition. For a more specific case, economic complexity does not support energy efficiency in all economic groups, although the situation improves for countries with an existing higher energy intensity in the advanced and emerging economies. Also, it adversely affects renewable energy consumption and renewable electricity output in all economic groups, except in a few quantiles where insignificance or heterogeneous outcomes are established. In sum, economic complexity cannot be said to aid the efficiency of the energy system and the transition to renewable energy owing to a number of identified factors. Subsidizing renewable energy consumption, provision of grants for renewable energy deployment, and setting energy efficiency standards are among the strategic policy derivatives of the findings of this study.