How do trade liberalization and human capital affect renewable energy consumption? Evidence from the panel threshold model

Abstract

Promoting the use of renewable energy was an important issue for achieving sustainable development. This article used data from 69 countries from 1990 to 2015. Considering the cross-section dependence, the second-generation unit root and cointegration tests were used. The pooled mean group (PMG) method was used to estimate long-term and short-term effects and the panel threshold model was employed to explore nonlinear effects of trade liberalization on renewable energy. Moreover, a mechanism analysis was implemented. Empirical results show: First, the PMG results revealed the long and short-term positive effects of trade liberalization on renewable energy. Second, the panel threshold model results revealed the double threshold effect of human capital in trade liberalization and renewable energy, as human capital gradually raised, the regression coefficient of trade liberalization first declines and then rises, showing a U-shaped trend. In addition, the mechanism analysis results revealed trade liberalization promoted the use of renewable energy through technological effects rather than scale and structure effects. Finally, our research results strongly support trade liberalization and human capital as potential forces to promote renewable energy consumption in the future. The policy implied the government should actively develop trade freedom and improve the level of human capital.