Impact of Economic and Non-Economic Factors on Renewable Energy Consumption

Chia, Meng Tjun (2026) Impact of Economic and Non-Economic Factors on Renewable Energy Consumption. Final Year Project (Bachelor), Tunku Abdul Rahman University of Management and Technology.

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Abstract

As the global economy faces the dual challenges of environmental degradation and energy insecurity, the transition towards renewable energy has become a critical imperative. This study investigates the impact of economic (industrial growth, inflation rate, oil price) and non-economic factors (social globalization index, climate vulnerability, political stability, energy dependency ratio) on renewable energy consumption (REC). Utilizing panel data spanning 29 years (1995 to 2023), this research employs the Pooled Mean Group (PMG) Autoregressive Distributed Lag (ARDL) estimator to examine long-run and short-run dynamics. To capture heterogeneous development stages, the sample encompasses 24 countries, evenly divided into 12 developed and 12 developing nations. The empirical findings reveal that while economic indicators like oil prices and industrial growth significantly drive renewable energy adoption, non-economic factors, particularly political stability and climate vulnerability, also play a crucial, yet differing, role depending on the country's development status. The study highlights that developing nations face unique institutional and financial bottlenecks that hinder their green transition, whereas developed nations benefit from stronger political frameworks and social globalization. Consequently, this paper recommends tailored policy interventions, such as building strategic renewable reserves and implementing localized green subsidies, to accelerate the global energy transition and ensure equitable sustainable development