Trade Liberalization and Renewable Energy Consumption in South Asia: A Panel Data Approach

Abstract

Traditional dependence on the use of non-renewable energy resources has led to adverse socioeconomic and environmental complications in almost all of the South Asian economies. Moreover, the geographical locations have made these nations extremely vulnerable to the global climate changes. Thus, a transition from non-renewable to renewable energy consumption is of immense significance from the perspective of sustainable development in this region. Against this backdrop, the focus of this paper is aimed to empirically shed light on the role of greater trade openness and the simultaneous international fund inflows on facilitation of the renewable energy transition across Bangladesh, India, Pakistan and Sri Lanka. This paper incorporated annual data stemming from 2000 to 2017 and employed the Panel-Corrected Standard Error regression methodology. This paper also estimates the threshold level of GDP growth rate facilitating renewable energy transition in the five aforesaid South Asian economies. Furthermore, panel Granger causality test was applied to distinguish the possible causal associations between the variables in the long run. In light of the estimated results, it is found that trade openness enables renewable energy transition and all the three sources of foreign inflows stimulate positive impacts on renewable energy consumption trends in the selected economies. Moreover, a non-linear relationship between renewable energy transition and GDP growth rate is also revealed from the statistical estimates.