Energy Reports (Nov 2021)
Can regional trade integration facilitate renewable energy transition to ensure energy sustainability in South Asia?
Abstract
This paper primarily aimed to assess the impacts of regional trade integration on the prospects of undergoing renewable energy transition in selected South Asian economies between 1992 and 2015. The overall results from the econometric analyses, controlling for the cross-sectional dependency and slope heterogeneity issues, highlight the importance of promoting intra-regional trade among the South Asian economies to boost the renewable energy consumption shares and renewable electricity output shares in the total final energy consumption and aggregate electricity output figures, respectively. Besides, the non-linearity of the nexuses between intra-regional trade shares and renewable energy consumption shares and between intra-regional trade shares and renewable electricity output shares are also ascertained. The threshold intra-regional trade shares concerning the renewable energy consumption and renewable electricity output shares are predicted at 20.53% and 17.50%, respectively. However, the predicted threholds are significantly higher than the current average intra-regional trade share in South Asia. Moreover, the panel causality analysis reveals unidirectional causal relationships stemming from intra-regional trade shares to renewable energy consumption and renewable electricity output shares. Besides, greater FDI inflows are found to reduce the overall use of renewable energy while higher levels of economic growth and CO2 emissions are found to catalyze renewable energy use in South Asia. Furthermore, the results also implicate a non-linear U-shaped association between positive crude oil price shocks and renewable energy consumption and renewable electricity output shares. Therefore, these findings impose critically important policy implications for liberalizing the intra-regional trade barriers, reducing dirty foreign direct investment inflows, expediting economic growth, reducing fossil fuel dependency and abating carbon dioxide emissions to facilitate renewable energy transition in South Asia.
