Exploring the Forms of the Economic Effects of Renewable Energy Consumption: Evidence from China

Abstract

Renewable energy’s economic effects have been hotly debated, as it is a promising energy source. However, scholars have not achieved an agreement on this hot topic. Therefore, this article re-examines the direct and indirect economic effects of renewable energy consumption in China from 1990 to 2020. Using the Granger causality test to conduct empirical analysis, the result suggests there is a bidirectional causality between renewable energy consumption and economic growth. Then, the mediation model is used for further analysis. The results suggest that economic growth is positively affected by renewable energy consumption. Meanwhile, renewable energy consumption can also indirectly affect economic growth through gross capital formation, the labor force, trade openness, research and development expenditure, and foreign direct investment. Based on the evidence this article provides, policymakers can issue corresponding policies to maintain sustainable economic growth while minimizing environmental pollution.