Renewable-energy consumption and international trade

Abstract

This paper investigates the implications for international trade of a country’s dependence on renewable energy consumption in total energy use. We use data for 152 countries over the period 1990–2014. We estimate a gravity equation of bilateral trade to assess the role of renewable energy consumption on international trade. We find, inter alia, that a 1% increase in the use of renewable energy as a proportion of total energy leads to, on an average, a 1.026% decrease in exports, and a 0.39% increase in imports, suggesting that renewable energy use makes trade less competitive. This outcome is due in part to cost implications of using renewable energy sources. However, we also find some heterogeneity in this respect. Whereas Organization for Economic Co-operation and Development (OECD) countries export more with increased use of renewable energy, for non-OECD countries renewable energy use reduces exports.