Economic policy uncertainty and renewable energy consumption: evidence from oil-rich countries

Farouq, Ibrahim Sambo and Zunaidah Sulong, . (2024) Economic policy uncertainty and renewable energy consumption: evidence from oil-rich countries. Journal of Sustainability Science and Management (Malaysia), 19 (2). pp. 150-172. ISSN 2672-7226

Global renewable energy consumption continues to decline in real terms and threatens our capacity to achieve energy security and climate change objectives. This study aims to shed light on the influence of uncertainty in economic policies, financial globalisation, oil prices, and income on a shift in renewable energy use. The study focuses on the OPEC member countries where renewable energy sources are declining. The study makes use of a data set of 11 economies between 2000M01 and 2020M12 and employs a range of heterogeneous approaches to analyse the effects. The cross-sectional dependence and slope homogeneity tests demonstrate that slope heterogeneity occurs across nations and that there exists a correlation between the cross-sectional units. The Westerlund co- integration results show that economic policy uncertainty, financial globalisation, oil price, income, and renewable energy have stable and long-run relationships. We reached the following conclusions based on the dynamic common correlated estimation results: First, financial globalisation increases renewable energy usage. Second, income appears to be insignificant. Third, both the economic policy uncertainty and the oil price variables have shown negative effects towards renewable energy use. This implies that these nations have not leveraged their growing affluence to shift away from traditional energy sources and towards green energy resources. It is therefore crucial for these nations to advance their finances through globalisation to promote the transition to a low-carbon economy.

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Abstract

Global renewable energy consumption continues to decline in real terms and threatens our capacity to achieve energy security and climate change objectives. This study aims to shed light on the influence of uncertainty in economic policies, financial globalisation, oil prices, and income on a shift in renewable energy use. The study focuses on the OPEC member countries where renewable energy sources are declining. The study makes use of a data set of 11 economies between 2000M01 and 2020M12 and employs a range of heterogeneous approaches to analyse the effects. The cross-sectional dependence and slope homogeneity tests demonstrate that slope heterogeneity occurs across nations and that there exists a correlation between the cross-sectional units. The Westerlund co- integration results show that economic policy uncertainty, financial globalisation, oil price, income, and renewable energy have stable and long-run relationships. We reached the following conclusions based on the dynamic common correlated estimation results: First, financial globalisation increases renewable energy usage. Second, income appears to be insignificant. Third, both the economic policy uncertainty and the oil price variables have shown negative effects towards renewable energy use. This implies that these nations have not leveraged their growing affluence to shift away from traditional energy sources and towards green energy resources. It is therefore crucial for these nations to advance their finances through globalisation to promote the transition to a low-carbon economy.

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Item Type:	Article
AGROVOC Term:	renewable energy
AGROVOC Term:	economic policies
AGROVOC Term:	oil and gas industries
AGROVOC Term:	economic analysis
AGROVOC Term:	income distribution
AGROVOC Term:	statistical data
AGROVOC Term:	statistical methods
AGROVOC Term:	stakeholders
AGROVOC Term:	countries
Geographical Term:	Algeria, Angola, Congo, Kuwait, Gabon, Iraq, Libya, Nigeria, Saudi Arabia, the United Arab Emirates, and Venezuela
Uncontrolled Keywords:	oil prices , policy uncertainty, financial globalisation
Depositing User:	Mr. Khoirul Asrimi Md Nor
Date Deposited:	01 Oct 2025 09:54
Last Modified:	01 Oct 2025 09:59
URI:	http://webagris.upm.edu.my/id/eprint/2201

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