Identifying Economic Factors of Renewable Energy Consumption—A Global Perspective

Abstract

This study aims to identify the factors most likely to affect renewable energy consumption (REC) across mostly homogenous country groups worldwide. Classifying countries into a relatively homogenous group is taken from their economic and social development level measured with the Human Development Index. We delimited highly, medium-, and low-developed countries and checked whether the sets of determinants for using renewable energy sources are the same. We constructed a panel dataset as a basis for the panel Bayesian model averaging (panel BMA) as a factor selection method. The most likely factors were found and compared between the groups of countries. Then, the panel fixed-effects models for each country group were estimated. The results allowed us to confirm that CO2 per capita emissions, terms of trade, GDP, foreign direct investment, crude oil price, and energy consumption from alternative sources are the most critical drivers of REC in group I. The most important factors in group II are CO2 per capita, labor force, forest area, and gas and coal consumption. In the third group, REC consumption differs from that of the more advanced groups and strongly depends on foreign direct investment inflow. The results allow the formulation of policy recommendations on a global scale.