Cross-sectional dependence in financial openness and its influence on renewable energy consumption in Asia

Lei Wang, Muhammad Hafeez, Sana Ullah and Izzet Ulvi Yonter

Energy & Environment, 2025, vol. 36, issue 7, 3294-3315

Abstract: Renewable energy is known for its lower environmental impact compared to conventional fossil fuels. The integration of financial openness plays a pivotal role in driving renewable energy consumption. The existing literature has predominantly overlooked the nonlinear impact of financial openness on renewable energy consumption. This study examines the nonlinear impact of financial openness on renewable energy consumption across different regions in Asia, such as Central Asia, East Asia, South Asia, Southeast Asia, and West Asia, by employing linear and nonlinear cross-sectionally augmented autoregressive distributed lag techniques. The findings of the linear analysis confirm that financial openness favorably impacted renewable energy consumption in the long run in all regions. On the other side, the nonlinear analysis highlights that an increase in financial openness promotes renewable energy consumption in all regions except West Asia. In contrast, the fall in financial openness hurt renewable energy consumption in Asia, Central Asia, and West Asia. Greenhouse gas emissions and GDP promote renewable energy consumption in almost all regions in both linear and nonlinear analysis, and ICT and trade help the consumption of renewable energy to rise in some regions. Policymakers in Asia and its subregions should focus on increasing the collaboration between the financial sectors of the Asian economies and increasing the flow of funds to renewable energy sources in Asia.

Keywords: Renewable energy consumption; financial openness; cross-sectional dependence (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:sae:engenv:v:36:y:2025:i:7:p:3294-3315

DOI: 10.1177/0958305X231219786

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