The impact of trade, environmental degradation and governance on renewable energy consumption: Evidence from selected ASEAN countries

Abstract

This study examines the impact of trade, environmental degradation and governance on renewable energy consumption in five selected ASEAN countries. Panel data from 1980 to 2018 and panel data techniques, i.e. Levin, Lin and Chu (LLC) and Im Pesaran (IPS), are employed to test stationarity in data. Stationarity tests reported that all the variables are stationary after the first order. In addition, the result of Pedroni's co-integration test confirmed the existence of a long-run relationship. Pooled Ordinary Least Square (POLS), Fully Modified Ordinary Least Square (FMOLS), and Dynamic Ordinary Least Square (DOLS) techniques are used for estimation purposes. The results manifest that trade openness, environmental degradation and urbanization have considerably decreased the use of renewable energy. Renewable energy consumption falls with the increase of trade magnitude, environmental degradation, and urbanization. Conversely, the impact of foreign direct investment (FDI) and the quality of governance on renewable energy consumption is positive, which means that an increase in FDI and the quality of governance leads to a rise in renewable energy consumption. Based on the study's findings, it is suggested that trade activities be diverted towards renewable energy and governance be improved to increase the use of renewable energy.