Unraveling the contemporary drivers of renewable energy consumption: Evidence from regime types

Abstract

The detrimental effect of climate change and pollutant emissions has shifted the attention of researchers and policymakers toward renewable energy resources. To unravel the underexplored determinants of renewable energy consumption, this study examines the individual and combined effect of innovativeness, regulatory quality, trade openness, and tax attractiveness after controlling for per capita GDP, financial liberalization, inflation, and political stability. In addition, system‐generalized method of moments estimator is utilized to reduce endogeneity bias in the model. A broader sample size of 85 countries is investigated and further divides it into four sub‐panels on the basis of regime types (full democracy, flawed democracy, hybrid, and authoritarian regime). The findings indicate that innovativeness, regulatory quality, and trade openness are the major drivers of renewable energy consumption in global panel. The combined effect of innovativeness and regulatory policy is also statistically significant on renewable energy consumption. Furthermore, tax attractiveness positively moderates the relationship between trade openness and renewable energy consumption. The results differ across sub‐panels; however, the observed factors explain more variation in renewable energy consumption for full democracy and flawed democracy panels. It is suggested that economies should be shifted from authoritarianism to democracy to improve their public, industrial, trade, and tax policies which may help them to boost the consumption and production of clean energy. © 2019 American Institute of Chemical Engineers Environ Prog, 38:e13146, 2019