Does financial development influence renewable energy consumption to achieve carbon neutrality in the USA?

Amine Lahiani, Salma Mefteh-Wali, Muhammad Shahbaz and Xuan Vinh Vo

Energy Policy, 2021, vol. 158, issue C

Abstract: In order to achieve the goal of carbon neutrality, as defined in the Paris climate agreement, the United States, the second-largest greenhouse gas emitter, must intensify its use of zero-carbon sources such as renewable energy. In this paper, we use the nonlinear autoregressive distributed lags (NARDL) model to investigate the influence of financial development on renewable energy consumption in the U.S. from 1975Q1 to 2019Q4. More precisely, three measures of financial development are considered: the overall financial development, bank-based financial development, and stock-based financial development indices. The model is augmented to control for the effects of real oil prices, real GDP, and trade openness. The empirical results show evidence of a long-run asymmetric effect of overall and stock-based financial development measures. Positive and negative changes in financial development measures dictate renewable energy consumption. In the short run, only negative changes of overall and stock-based financial development measures significantly impact renewable energy consumption. The latter impact is contemporaneously positive and negative at the one-lagged period. Renewable energy consumption does not react to a short-run change in bank-based financial development. Our empirical findings possess important policy implications.

Keywords: Financial development; Renewable energy consumption; USA (search for similar items in EconPapers)
JEL-codes: D53 P48 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (41)

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Working Paper: Does financial development influence renewable energy consumption to achieve carbon neutrality in the USA? (2021)
Working Paper: Does financial development influence renewable energy consumption to achieve carbon neutrality in the USA? (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:enepol:v:158:y:2021:i:c:s0301421521003943

DOI: 10.1016/j.enpol.2021.112524

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