Researchers from Near East University have conducted a study focusing on the relationship between financial development and renewable energy consumption in Nigeria, aligning with global efforts to address climate change. Recognizing the urgent need for sustainable solutions, Nigerian stakeholders have set a commendable goal of achieving net-zero emissions by 2060.
The study employs an innovative approach, utilizing Quantile-on-Quantile (QQ) and quantile regression techniques to investigate the impact of financial development on renewable energy consumption in Nigeria from 1960 to 2018. In addressing the limitations of existing literature, the researchers consider GDP per capita, energy price, and CO2 emissions as moderating variables to eliminate omitted variable bias.
Results from the QQ technique reveal that financial development supplies mixed shocks, both positive and negative, to renewable energy consumption, with highly negative shocks noted. The quantile regression analysis further highlights that financial development negatively influences renewable energy consumption at both lower and upper quantiles. Additionally, the study introduces moderating variables, including CO2 emissions, indicating a small but consistent negative impact on renewable energy consumption.
The implications for policy are significant. Policymakers are urged to comprehend how financial development affects clean energy usage through direct, business, and wealth effects. Understanding these channels is crucial for fostering a competitive and sustainable energy industry, offering a prompt solution to Nigeria’s low level of financial development.
The study recommends considering local financial and economic development levels when formulating policies and emphasizes the strengthening of bank-based financial institutions to protect renewable energy investors from market volatility. Policymakers are also encouraged to create incentives, such as reducing lending rates, establishing renewable energy investment funds, and implementing favorable tax policies, to boost demand for renewable energy investments.
In conclusion, this research contributes valuable insights to the global discourse on renewable energy and climate change mitigation. While based on a single-country analysis, the study calls for future research to employ a panel framework, include additional financial development indicators, explore diverse renewable energy resources, and utilize different econometric techniques for a more comprehensive understanding of the complex interplay between financial development and renewable energy consumption.
More Information:
https://link.springer.com/article/10.1007/s12076-023-00330-2
