Determinants of renewable and non-renewable energy demand in China

Abstract The present study is designed to empirically investigate the effect of financial development, per capita income and trade openness on renewable and non-renewable energy consumption in China. To achieve that, we make use of annual data from 1980 to 2016 and employ several robust time series econometric techniques. Our empirical findings from the fully modified ordinary least squares (FMOLS) technique suggest that increase financial development and per capita income contribute for higher energy demand of both renewable and non-renewable energy sources in China. The evidences also show that their impact is more on renewable energy than that of non-renewable energy. These findings indicate that both financial development and per capita income are the important factors in driving renewable energy consumption in China. In contradiction to that, the trade openness positively affects non-renewable energy consumption, while it negatively impacts on renewable energy. This therefore infers that the internationalization of trade is putting more pressure on non-renewable energy sources in China. Given these findings, we discuss and provide numerous practical and policy implications for China.