The Impact of Financial Development on Renewable Energy Consumption: Evidence from RECAI Countries

Dilber Doğan, Yakup Söylemez, Şenol Doğan () and Neslihan Akça
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Dilber Doğan: Independent Researcher, 55800 Samsun, Turkey
Yakup Söylemez: Department of Accounting and Tax, Zonguldak Bülent Ecevit University, 67800 Zonguldak, Turkey
Şenol Doğan: Department of Management and Organization, Ondokuz Mayıs University, 55800 Samsun, Turkey
Neslihan Akça: Department of Accounting and Tax, Aydın Adnan Menderes University, 09000 Aydın, Turkey

Sustainability, 2025, vol. 17, issue 14, 1-18

Abstract: Many environmental risks, such as global warming and depletion of natural resources, force governments to achieve economic growth and financial development without causing environmental degradation. The dependency of countries’ dependence on fossil fuels also causes energy supply security problems due to the associated risks at regional and global levels. These reasons lead countries to diversify and increase their renewable energy investments. In this context, this study focuses on the most attractive countries in terms of renewable energy investments and analyzes the relationships between renewable energy consumption (REC), carbon dioxide emissions (CO 2 ), economic growth (EGRO), financial development (FD), and energy dependence (EDP) using the panel regression method. This research uses data from 38 countries between 1991 and 2021 within the scope of the “Renewable Energy Attractiveness Index” (RECAI) created by Ernst & Young. As a result of the heterogeneity and cross-sectional dependency tests, the data were analyzed using the Westerlund cointegration test, the Augmented Mean Group (AMG) estimator, and the Emirmahmutoglu and Kose causality test. The findings from this study show that FD and EGRO have a positive and significant effect on REC, whereas they have a negative and significant relationship with CO 2 emissions. Findings from the causality test show that FD has an impact on both CO 2 and EGRO. In addition, within the scope of this study, a causality was determined between EDP and REC, and a mutual relationship between energy demand and CO 2 was revealed. In light of these findings, governments should increase their investments in renewable energy to ensure sustainable economic growth and energy supply security while minimizing environmental degradation.

Keywords: RECAI; renewable energy consumption; CO 2 emissions; economic growth; financial development; energy dependency (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2025
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