Nexus between financial development and renewable energy: Empirical evidence from nonlinear autoregression distributed lag

Abstract

A human-induced rise in temperatures is exacerbating droughts and other adverse weather events. Fossil fuels as a primary energy source contribute to global warming. It is, therefore, necessary to boost the number of renewable energy initiatives. To better comprehend how to improve renewable energy initiatives, simultaneous evaluation of a range of influential factors is required. This study examined financial development, economic progress, and energy pricing to understand how they affect energy consumption. Using the nonlinear autoregression distributed lag model, we analyzed the effect of financial inclusion on renewable energy consumption in China's 30 provinces from 2000 to 2020. The data showed that financial development has a considerable impact on renewable energy use. The findings of this study revealed that every 1% increase in financial development leads to a 0.24% increase in renewable energy use. This study's primary goal is to offer China a framework for increasing renewable energy investments that are socially and economically viable. This study also paves the way for other nations that import energy. As a result, it will be easier to meet sustainability targets if more projects employ renewable energy after this pandemic.