Macroeconomic Determinants of Non-renewable and Renewable Energy Consumption in India: The Roles of International Trade, Innovative Technologies, Financial Globalization, Carbon Emissions, Financial Development, and Urbanization

Abstract

Against scenarios of rising fossil fuel dependence and slow renewable energy adoption rates, this study appraises macroeconomic factors affecting non-renewable and renewable energy consumption in India. Additionally, this study makes a novel attempt to evaluate the determinants of divide between India's non-renewable and renewable energy consumption levels. Overall, the findings are three-fold. Firstly, it is found that in the short-run India's non-renewable energy consumption levels are positively and negatively determined by technological innovation and financial globalization, respectively. Besides, in the long-run, non-renewable energy consumption is positively influenced by international trade, financial globalization, carbon emission, and financial development; conversely, technological innovation reduces non-renewable energy consumption. Secondly, India's renewable energy consumption levels, in the short-run, are positively determined by international trade and technological innovation, while financial development impedes renewable energy consumption. Moreover, in the long-run, renewable energy consumption is positively and negatively impacted by technological innovation and financial globalization, respectively. Thirdly, the results confirm that financial globalization in the short-run and technological innovation in the long-run reduce the divide between India's non-renewable and renewable energy consumption levels. Contrarily, in the long-run, carbon emissions, international trade, financial globalization, and financial development widen this divide. Accordingly, policy suggestions are provided for the Indian government.