Renewable and Non-Renewable Energy Consumption in BRICS: Assessing the Dynamic Linkage between Foreign Capital Inflows and Energy Consumption

Zhexuan Qin,Ilhan Ozturk

doi:10.3390/en14102974

Abstract

This study attempt to fill the research gap by figuring out the dynamic effects of foreign capital inflows effect on renewable energy and non-renewable consumption by using the time series non-linear ARDL approach for BRICS from 1991 to 2019. Non-linear ARDL estimates show that positive change in foreign capital inflows has a positive effect on renewable consumption in Brazil, India, and South Africa in long run. Also, the negative change in foreign capital inflows exhibits negatively liked with renewable energy consumption in BRICS economies, except Russia in long run. We find that positive shock in foreign capital inflows tends to increase non-renewable energy consumption in BRICS except India in the long run. Finding suggests that negative change in foreign capital inflows has negative impacts on non-renewable energy consumption in India and Brazil, while the positive effect in only China in the long run.

Highlights

Detecting the key factors of renewable and non-renewable energy consumption is an essential research topic for developing and developed economies because energy consumption has great importance for the environment
REt = φ0 + φ1FCIt + φ2REMt + φ3GDPt + φ4Tradet + t. This model is expressed from the BRICS perspective and both models include foreign capital inflows (FCI) as a proxy of foreign direct investment (FDI) that is a focused variable in our analysis
The nonlinear Autoregressive Distributed Lag (NARDL) analysis attempts to investigate whether the effects of FCI on renewable energy consumption and non-renewable energy consumption are asymmetric or not

Summary

Introduction

Detecting the key factors of renewable and non-renewable energy consumption is an essential research topic for developing and developed economies because energy consumption has great importance for the environment. The first study of Mielnik and Goldemberg [8], who noted that foreign capital inflows have reduced non-renewable energy consumption in developing countries. A similar analysis is conduct by Kutan et al [16] for emerging economies and found that foreign capital inflow exhibits a significant positive effect on renewable energy use. Our study aims to examine the non-linear impact of foreign capital inflows on the consumption of renewable and non-renewable energy for BRICS economies from 1991 to 2019. We employed the non-linear ARDL approach for each economy separately because it addresses the issue of aggregation bias This econometric approach examines the impact of positive and negative shocks of foreign capital inflows on renewable and non-renewable energy. This study resolves the problem of aggregation bias due to panel data via country-specific analysis

Methodology and Data Acquisition

Results and Discussion

South Africa