Determinants Of Renewable Energy Consumption: A Study Among Asian Countries

Abstract

Even though renewable energy consumption is a fundamental and practical topic to study, there are not many research papers discussing this topic. Therefore, this research is conducted to study the which factors can have negative and positive influences on the consumption of renewable energy in Asian countries. The determinants collection chosen for this research consists of Gross Domestic Products per capita, Openness for Trade, the Index for Human Development, the Foreign Direct Investment, Carbon Dioxide Emissions, and Democracy level. The sample chosen to conduct this paper consists of 34 Asian countries, from 2000 to 2020. Our research focuses on countries where the range of income is from middle to high. Firstly, I discuss the general information regarding the status of renewable resources usage, in the Asia region and in the world. Then, the prior studies in the field are reviewed, to reveal a comprehensive background on the definition of each variable and their effects on renewable energy consumption. Consequently, I apply several econometrics approaches, namely Fixed effect models, Random effects models, and Pooled Ordinary Least Squared model to study for the degree of affection of independent variables and dependent variables. The Hausman and Lagrangian multiplier tests are conducted to select the more efficient model among those three proposed. The model is then testified for common errors such as heteroskedasticity, autocorrelation, and multicollinearity. Lastly, the standard robust error technique is applied for error correction and generating the most appropriate model to study the affection levels of independent variables to dependent variables. The empirical results indicate that the fixed effects model has the highest level of efficiency, with an explanatory rate of 65.62%. After being modified by the standard robust error technique, it is inferred from the model that the index for anthropological development positively affects renewable energy consumption, while the per capita Gross Domestic Products and carbon dioxide production have negative effects. All of these explanatory variables have ix strong influences on renewable energy consumption. Lastly, I discuss several implications for this research and deliver recommendations to the industry and future research, as well. The author provides basic recommendations such as policy enhancement, human development, and carbon dioxide reduction.