Renewable Energy Consumption Determinants: Do They Differ between Oil-Exporting Countries and Oil-Importing Ones?

Abstract

This paper delves into the critical determinants of renewable energy consumption, focusing on the contrasting roles of oil imports and exports. It aims to bridge the knowledge gap by comparing these determinants across both oil-importing and oil-exporting nations, offering a comprehensive and nuanced perspective to inform policy recommendations. Using annual data from 1990 to 2018 sourced from the World Bank database, the study employs panel multiple regression analysis and adopts a fixed effects model to explore two main questions: What drives the use of renewable energy sources? How does a country’s oil importer or exporter status affect these factors? The findings reveal a significant but inverse relationship between oil rents and renewable energy consumption (REC) for both types of countries. Additionally, there is a notable negative correlation between GDP growth and REC for both oil-exporting and oil-importing countries. Interestingly, the crude oil average closing price and inflation show an insignificant impact on REC in both contexts. The study also highlights that net energy imports significantly affect REC, with a much stronger inverse relationship in oil-importing countries compared with oil-exporting ones. For oil-importing countries, diversifying energy sources is a crucial investment. Governments should prioritize research and development in renewable energy to spur technological advancements, enhancing efficiency and affordability. Economic growth-promoting policies, such as tax incentives and subsidies for renewable energy businesses, are vital for encouraging sustainable practices. Consistent, long-term policies are essential for providing investor confidence and supporting the transition to renewable energy. For oil-exporting countries, similar strategies are recommended. Additionally, allocating a portion of oil revenues to renewable energy infrastructure and funding research and development in renewable technologies through local universities and startups are crucial steps. This dual approach will not only enhance energy diversification but also foster innovation and sustainability in the energy sector.