The Influence Of Financial Development On Renewable Energy Consumption In Asia

Abstract

This study assesses the influence of the growth of finance on the use of renewable energy in 41 countries in Asia between 2010 and 2020. By applying a panel data regression model, the research investigation explores the influence of financial evolution on the adoption of renewable power. Furthermore, to enhance the empirical aspect of the issue, the study not only examines the impact of the overall data sample but also segments it into three distinct economic classifications (high-income, upper middle-income and lower-middle-income) for assessment. Contrary to expectations, when evaluating the entire sample data, the results demonstrate that the progress of growth in finances has a detrimental effect on the usage of alternative energy. This implies that as the financial systems in these countries develop and become more complex, there may be a tendency to favor investments in traditional energy sectors over renewable energy sources. Furthermore, the analysis illustrates that both the inflow of foreign investment and structure of industries also negatively affect sustainable power consumption, reflecting the preference of traditional energy-intensive industries. Conversely, inflation tends to be beneficial to the usage of renewable power, implying that as prices rise there will be a transition towards more stable and sustainable energy sources. Notably, economic development and trade openness have no significant impact, demonstrating the complexity of the interaction between economic dynamics and sustainable energy practices. The study’s finding emphasizes the need to implement suitable financial and industrial policies to cultivate a supportive environment for renewable energy development under diverse economic conditions in Asia.