Role of economic complexity to induce renewable energy: contextual evidence from G7 and E7 countries

ABSTRACT

The prime objective of this article is to examine the heterogeneous impacts of economic complexity on renewable energy demand within a panel of G7 and E7 countries. One of the important contributions of this research is to explore the role of overall structural change and economic factors for renewable and cleaner energy in developed and emerging economies. The existing literature points to scant research about the impacts of economic complexity on energy transformation and renewable energy adoption. During recent years, the G7 and E7 countries have encountered enormous competition in manufacturing and industrialization and are also experiencing global pressure from both climate change and Sustainable Development Goals (SDGs) for the promotion of renewable energy infrastructure. Taking into consideration the heterogeneity of issues, the authors apply the Westerlund cointegration and heterogeneous panel data techniques (FGLS, system GMM, FMOLS, and DOLS) for an in-depth, empirical analysis. Interestingly, empirical findings indicate that economic complexity affects renewable energy demand from G7 and E7 countries. This paper documents that economic complexity is a policy factor for overall energy transformation and greener energy demand. This study recommends that complexity and structural change policies should be observed for cleaner and greener growth and overall greener energy promotion.

KEYWORDS:

• Economic complexity
• greener energy
• urbanization
• developed countries
• emerging countries
• Westerlund cointegration

Acknowledgment

The datasets used during the current study are available on request.

Declaration of Interest

The authors declare that they have no known competing financial interests or personal relationships that could have appeared to influence the work reported in this paper.

Correction Statement

This article has been republished with minor changes. These changes do not impact the academic content of the article.

Research highlights

• The impact of economic complexity on renewable energy demand is examined.

• Westerlund cointegration and panel data regressions (system GMM, FMOLS, DOLS) are used for econometric analysis.

• The empirical evidences confirm that economic complexity and urbanization significantly affect the renewable energy of G7 and E7 countries.

• Structural transformation is a significant contributor to adopt renewable energy sources.

Notes

¹ The economic complexity and product complexity data is available at https://oec.world/en/resources/data/.

Additional information

Funding

The first author would like to thank International Postdoctoral Exchange Program, Shandong University, Under the China International Postdoctoral Exchange Fellowship Program for financial support.