The Interplay of Financial Development, Oil Prices, and CO2 Emissions in Shaping Renewable Energy Consumption in Emerging Nations: An Evidence from Panel Quantile Regression

Abstract

Using the panel dataset of 22 emerging economies from 2005 to 2021, this study investigates the impact of financial development, CO₂ emission, oil prices, trade openness, and FDI on renewable energy consumption. To this end, we employ panel quantile regression (PQR) by Powell (2016) and Methods of moment quantile regression (MMQR) by Machado and Silva (2019). In addition, we employ POLS, OLS with Driscoll and Kraay (1998) standard errors, and FMOLS. The results confirm that all the variables significantly influence renewable energy consumption in the sample region. Specifically, financial development has a positive influence on renewable energy use while oil prices exert contrasting effects on renewable energy consumption. It diminishes renewable energy use in the lower quantile range and has a positive increasing effect in the upper quantile range. Moreover, foreign direct investment has a positive effect on renewable energy consumption while CO₂ impedes the consumption of renewable energy in higher quantities. In light of these outcomes, this study contributes substantially to the empirical literature and will help practitioners and policymakers to design environmentally and economically friendly energy systems for emerging nations.