The asymmetric effects of changes in price and income on renewable and nonrenewable energy

Abstract

Due to the ongoing climate change and environmental pollution, renewable energy supply has been overemphasized in many countries. Since an increase in the prices of non-renewable energy sources or the country's income might shift energy demand from non-renewable energy sources to renewable energy sources, this study examines the relationship of renewable and non-renewable energy consumptions with income and price. Whether price and income have an asymmetric effect on energy consumption was tested in the models constructed for 42 net energy exporter countries from 2000 to 2018. The asymmetry test indicates that only price has an asymmetric effect on solar, wind, and geothermal energy consumption among renewable energy sources, whereas both price and income have an asymmetric effect on oil consumption among non-renewable energy sources. According to the results of using specific heteroscedasticity and individual-specific first order autocorrelation to estimate the symmetric and asymmetric panel regression model, the income elasticity in the wind and solar energy models was more than one. Moreover, although the consumption of all energy sources is sensitive to the price of crude oil, positive shocks in prices are more effective on consumption than negative shocks in prices.