Is product proximity a driver for better energy security? Global evidence of nonlinear relationships between product proximity and energy security

ABSTRACT

This study examines the non-linear relationship between product proximity, as captured by the Economic Complexity Outlook Index, and various dimensions of energy security: acceptability, develop-ability, and sustainability. By applying diverse econometric techniques to a global sample of 20 developing countries and 30 developed countries over the period 2002–2018, our estimates reveal three critical findings. First, we confirm the existence of a nonlinear association between product proximity and non-fossil energy consumption, energy intensity, and energy consumption in the form of an inverted U-shaped curve, suggesting that efforts to produce a good which is located in the core of the product space (higher product proximity) endanger the energy security of countries positioned in the early phase of the economic complexity evolution. Nevertheless, product proximity turns out to be beneficial for the energy system when it reaches a sufficiently high level. Second, our findings add empirical evidence of the ‘technical obsolescence’ effect where a high level of product proximity causes higher non-fossil or non-renewable energy consumption and, hence, greater carbon dioxide (CO₂) emissions in the long run. Third, increased product proximity has serious consequences for energy security in developing economies, while the beneficial impact of product proximity on the energy system from mitigating energy intensity, negating CO₂ emissions, and increasing renewable energy consumption is found in their developed counterparts. This research provides a fresh perspective for policymakers to address national energy security based on the types of products being produced.

KEYWORDS:

• Product proximity
• energy security
• nonlinear effects
• short-term and long-term effects
• global sample

Acknowledgments

We would like to thank the Editor and the anonymous Reviewers for providing very professional and competent comments and suggestions towards the improvement of this manuscript in many ways, both theoretically and empirically.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Data availability statement

Data available on request due to privacy/ethical restrictions

Appendix

Notes

1. For further descriptions of ECI and COI, please access https://atlas.cid.harvard.edu/glossary.

Additional information

Funding

This work was supported by the National Economics University under Grant number: Đại học Kinh tế Quốc dân 266/QD-DHKTQD.