Macroeconomic Determinants of Renewable Energy Consumption: a Cross-sectional based Analysis

Abstract

Countries throughout the world have plans to enhance renewable energy usage through the integration of funds, income, and economic regulations. However, traditional energy sources involve significant amounts of greenhouse gases, which contribute to rising temperatures and environmental damage. To maintain an acceptable temperature and decrease global warming, fossil fuels must be substituted with renewable energies. To guarantee stability and ecological sustainability, all governments, particularly those that produce oil, must prioritise the emergence of renewable energies. In this context, we use the cross-sectional autoregressive distributed lags (CS-ARDL) model to investigate whether economic policy uncertainty (EPU), financial openness (FO), oil rents (OILR), exchange rate (EXR), and income might encourage the shift from fossil fuels to clean energy supplies. This study observed that FO and EXR boost the REC, while income proves to be inconsequential. Specifically, the EPU along with the OILR have a detrimental impact on green energy use. The article investigates possible policy proposals. With empirical data, it is advised that the government implement policies for financial stability and improved conditions for foreign investors in order to generate continuous growth in clean energy sources transformation and economic integration.