Renewable energy consumption, globalization, and economic growth shocks: Evidence from G7 countries

Abstract

This paper examines the asymmetric responses of renewable energy (RE) technology to globalization and economic growth shocks across the G7 countries using the Nonlinear Cointegrating Auto-Regressive Distributed Lag (NARDL) model. Our results indicate asymmetries across these countries and that positive shocks on globalization increase RE in Canada, Germany, the United Kingdom (UK), and the United States (US) while negative shocks decrease RE. However, both positive and negative globalization shocks promote RE consumption in Italy and Japan but decrease it in France. In contrast, both income shocks increase RE in France whilst positive income shocks increase RE in Canada, Germany, and Italy while negative shocks decrease RE. Positive income shock facilitates RE in the UK and the US while negative income shocks are detrimental to RE in Japan. Further analysis using panel cointegration, Fully Modified Ordinary Least Squares, and Panel Dynamic Ordinary Least Squares suggests that RE deployment in the G7 countries is mainly driven by positive shocks on income, globalization, and capital. We discuss the implications of the findings.