How does the EU's COVID-19 economic recession impact the renewable energy of other countries? The spillover effect

Abstract

This work is aimed to explore the indirect impact of the EU's COVID-19 economic recession on global renewable energy consumption from the perspective of spillover effect. To this end, a global vector autoregressive (GVAR)-energy model was constructed based on the data of 33 major economies. After unit root test, cointegration test, weak exogeneity and structural stability test, the simulation results show that the spillover effects of the EU economic recession do not lead to a decline in the renewable energy consumption in all other countries. In fact, the spillover effect of the EU economic recession leads to an increase in renewable energy consumption in a small number of other countries, such as India. However, the spillover effect of the EU economic recession leads to a decline in renewable energy consumption in most other countries in the long run. Especially, the spillover effect of a 1% decline in the EU economy causes renewable energy consumption in the United States and China to fall by approximately 0.1% and 0.8%, respectively. Targeted renewable energy development policies should be developed to reduce the negative spillover effects of EU COVID-19 economic recession on renewable energy development.