The Effect of Renewable Energy Consumption on Current Account Balance: Panel Data Analysis

Elif İmzalı () and Yusuf Bayraktutan
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Elif İmzalı: Institute of Social Sciences, Kocaeli University, 41000 Kocaeli, Türkiye
Yusuf Bayraktutan: Department of Economics, Faculty of Political Sciences, Kocaeli University, 41000 Kocaeli, Türkiye

Sustainability, 2025, vol. 17, issue 21, 1-11

Abstract: Different resources of energy are unevenly distributed around the world. Not every country has energy resources of its own. Those that have, may experience inadequacy in meeting domestic demand. Countries have to import the needed energy regardless of the size of worldwide price fluctuations and crises that come into existence in the global marketplace, which works in favor of energy-exporting countries. Foreign dependence on energy negatively affects the current account balance. Energy importation has an important share in the current account deficit of non-oil-exporting countries, such as Türkiye, in which as a developing country with a young and growing population, energy demand is increasing, and new natural gas and oil reserves as well as renewable energy sources are sought in order to remove foreign dependency. This study aims to determine the effect of making use of renewable energy sources on the current account deficit for a selected sample of countries which consist of 12 European Union (EU) and International Energy Agency (IEA) members including Türkiye. A balanced panel data regression analysis was conducted using the data of these countries for the period of 2000–2022. As a result of the analysis with the Driscoll–Kraay estimator, it was observed that as the share of renewable energy sources in total energy consumption increases, a reducing effect is achieved in terms of current account deficit. As renewable energy technologies develop, countries will have access to energy. This will reduce their foreign exchange expenditure, decrease their current account deficit, and strengthen price stability and growth performance.

Keywords: import dependency for energy; renewable energy sources; current account balance; sustainable development (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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