Export diversification and disaggregate energy consumption in BRICS economies: Does environmental degradation matter?

Abstract

The role of exports as a catalyst for income growth necessitates the utilization of energy resources in manufacturing industries. Consequently, major exporting nations are embracing a dual approach, employing both renewable and non-renewable energy sources, to enhance export promotion while addressing environmental concerns. In this study, we examine the intricate relationship between export diversification and disaggregated energy consumption, specifically focusing on renewable and non-renewable energy, within the framework of the BRICS countries from 1990 to 2020. Notably, our investigation contributes significantly to the understanding of the moderating influence of environmental degradation, employing the Markov Chain Monte Carlo (MCMC) panel quantile regression method. Our findings reveal that initially, export diversification exerts a negative impact on renewable energy consumption. However, as countries attain a comparative advantage in diversification, this relationship transitions into a positive correlation. Additionally, we observe a significant positive association between export diversification and non-renewable energy consumption, which subsequently turns negative once the level of comparative advantage is reached. Moreover, we uncover that CO2 emissions, serving as a proxy for environmental degradation, partially moderate the link between export diversification and renewable energy consumption, while fully moderating the relationship with non-renewable energy consumption. Furthermore, we identify heterogeneous effects of outward foreign direct investment (FDI), innovation, human capital, and institutional quality on the disaggregated levels of energy consumption across the BRICS economies. In light of these findings, we propose the adoption of a prudent approach towards energy resource utilization, taking into account environmental safety considerations within the BRICS countries.