Determinants of renewable energy adoption in China and India: a comparative analysis

Abstract

This article examines the dynamic relationships among output, carbon emission and renewable energy generation of India and China during the period 1972 to 2011 using a multivariate vector error correction model (VECM). The results for India reveal unidirectional short-run causality from carbon emission to renewable energy generation and from renewable energy generation to output, whereas in the long run, the variables have bidirectional causality. Causalities in China give a rather different scenario, with a short-run unidirectional causality from output to renewable energy and from carbon emission to renewable energy generation. In the long run, for China, unidirectional causality is found from output to renewable energy generation, while bidirectional causality is found between carbon emission and renewable energy generation.

Keywords:

• renewable energy
• CO₂ emission
• time series data
• vector error correction model
• causality

JEL Classification:

• C22
• C32
• Q20
• Q43
• Q48

Acknowledgement

We are grateful to the anonymous referee and the editor of this journal for helpful comments and suggestions which tremendously improved the quality and presentation of the article. However, we alone are responsible for any error remaining.

Supplemental data

Supplemental data for this article can be accessed here.

Notes

¹ National investment totals do not include government and corporate R&D because such data are not available for all of these countries.

² Utility-scale refers to wind farms, solar parks and other renewable power installations of 1 MV or more in size, and biofuel plants with capacity of more than 1 million litres.

³ In addition to the above studies, recent research, such as Ang (2008), include pollutant emissions in their analyses to investigate the relationship between energy consumption and economic activities. However, since Ang does not include prices in the models, this is not a complete demand-side model.