Renewable Energy 147 (2020) 322e329

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Renewable Energy
journal homepage: www.elsevier.com/locate/renene

The relationship between renewable energy consumption and trade

openness: New evidence from emerging economies
Feyyaz Zeren a, *, Hilmi Tunahan Akkuş b
a
Yalova University, Turkey
b
Balıkesir University, Turkey

a r t i c l e i n f o a b s t r a c t

Article history: In this study, the relationship between trade openness, renewable and non-renewable energy con-
Received 12 September 2018 sumption for “Top Emerging Countries of Bloomberg” in 1980e2015 period is investigated. The long-run
Received in revised form relationship between panels is examined with Dumitrescu-Hurlin (2012) panel causality test, West-
22 July 2019
erlund (2006) panel cointegration test with multiple structural break and Pesaran (2006) CCE-MG
Accepted 2 September 2019
Available online 5 September 2019
cointegration estimator. According to findings, it was found that the use of non-renewable energy is
the one of main reason for the increase in trade openness. In addition, the increase in the use of
renewable energy was founded to be an important factor in decreasing the trade openness for these
Keywords:
Renewable energy
Emerging Countries. The results of the study provide valuable information on how to increase the use of
Non-renewable energy renewable energy for a sustainable economy in the long term for decision-makers, as well as for in-
Trade openness vestors on the future of energy-related investments.
Emerging economies © 2019 Elsevier Ltd. All rights reserved.

1. Introduction
Rapid population growth, technological development, indus-
trialization, urbanization and rapid increases in commercial activ-
ities increase the energy demands of developing countries all over
the world. The energy issue as an indicator of economic and social
development of the countries attracts great interest. Energy has a
strategic importance in terms of technical, legal, and economical
aspects, international relations and environmental pollution. From
an economic perspective, energy products, major import items
causing foreign exchange outflow for countries that do not have
energy sources, are important inputs for production, namely cost
factor. In addition, energy, which affects many macroeconomic
changes through secondary effects such as inflation and exchange
rate increase, continues to be a prior issue. On the other hand,
energy sector investments are other economic aspects for the issue.
Therefore, significant improvements in energy production-
consumption and energy supply security have been witnessed in
many countries.
There is a close relationship between the consumption of energy
and economic development, one of the basic inputs of economic
* Corresponding author.
E-mail address: feyyaz.zeren@yalova.edu.tr (F. Zeren).
and social development. Per capita primary energy and electricity
consumption are important indicators used in international com-
parisons to determine the development levels of countries [21];
295). Energy is the basic input of the production process required
for social and economic development [43]; 193). The presence of
energy is an important and repulsive force for raising the standard
of living throughout the country [30]; 10275). The increase in en-
ergy demand has been growing above the rate of world population
and continues to increase in parallel with the technological in-
novations [11]; 290). Today, energy and economy have become
integrally interrelated, and the use and trade of fossil resources
have become a major driver of global politics [20]; 473).
The need for energy has been provided from different sources to
date. Traditional energy sources such as coal, oil and natural gas are
the main fossil fuels formed in millions of years [22]. However,
fossil fuels have been rapidly depleted as a result of the increasing
world population and economic developments, and are likely to
run out in the near future. In addition, fossil fuels cause significant
harm to the environment, making it inevitable to return to
renewable energy sources [23]; 159). Renewable energy sources
such as hydropower, biomass energy, solar energy, wind energy,
geothermal energy and wind energy [35]; 14 [3]; 8) are primary
energy sources that can be used without making any changes as
they come from nature [3]; 8). Although, the fossil resources are
limited, and the steps can be taken about fossil resources are also

https://doi.org/10.1016/j.renene.2019.09.006
0960-1481/© 2019 Elsevier Ltd. All rights reserved.
 F. Zeren, H.T. Akkuş / Renewable Energy 147 (2020) 322e329
limited, renewable resources can be effectively utilized since they
are both theoretically unlimited and sensitive to the environment.
Renewable energy is one of the greatest source for handling
energy increase issue. Strong growth in renewable energy is ach-
ieved through increased competitiveness of wind and solar energy.
[7]; 95). The renewable energy sector continues to be one of the
most dynamic, rapidly changing and transformer sectors of the
global economy. The technological developments, the decline in
costs and the huge impact of new financing structure have made
the sector the driving force of economic growth all over the world.
Above all, there is a global consensus on how to deal with the threat
of climate change through the use of clean energy technologies in
the world. The International Climate Treaty in Paris in December
2015 gave the countries a new impetus to support policy incentives
for clean energy development (ITA 2016, 5).
On the other hand, the trade openness, which is an important
macroeconomic variable, has become a problem with significant
disruptive effects on other economic variables. One of the factors
affecting the formation of the trade openness in energy-dependent
countries is the import of energy products. As a result, the energy
issue for such countries is prior for dealing with the trade openness
problem. Energy consumption can affect the trade openness in
different ways [36]; 127): First, the machinery and equipment in
the production process require energy, an important input to en-
ergy production. Second, exporting or importing of goods or pro-
ducing raw materials requires energy. In this context, without
sufficient energy supply, the trade openness will be affected
negatively. As a result, energy is an important input to the expan-
sion of trade and sufficient energy consumption is essential to
expand trade through expanding export-import.
Trade openness affects energy demand in three different ways
as scale effect, technical effect and composite effect [36]; 126):
while other factors are constant, the presence of trade openness
increases economic activity, as well as domestic production and
economic growth. The increase in domestic production is reshaping
energy demand due to the expansion in domestic demand, called as
scale effect. The trade openness allows emerging economies to
import advanced technologies from developed economies. Adopt-
ing advanced technology reduces energy density. Economic results
of advanced technology applications are less energy consumption
and more production, often referred to as the technical effect. The
composite effect reveals energy-intensive production as the result
of economic development, such as the transition from agriculture
to industry. In the initial stage of economic development, the
transition occurs from the agricultural sector, in which the econ-
omy needs less energy to the industrial sector, where there is more
energy use. In the maturation phase of the later economic devel-
opment, the direction of transition is from the industrial sector to
the service sector, where there is less energy need. Thus, energy
density is reduced by composite effect.
Countries need to produce in order to provide economic growth.
In this direction, one of the most important inputs required for
production is the energy as described above. Developing countries,
in which not only primary energy sources such as oil, natural gas,
and coal, but also energy sources that require advanced technology
such as nuclear energy are absent, are dependent on foreign
countries. For this reason, it is possible that these countries will
experience both economic growth and an increase in the current
account deficit. In this respect, the motivation of the study is to
determine whether the use of renewable energy will be beneficial
to ensure sustainable economic growth of countries that are
dependent on foreign countries for energy and to decrease the
current account deficit permanently.
In previous empirical studies presented in the second chapter,
total energy consumption was generally used for analysis and the
323
relationship between total energy consumption and some variables
was examined. In particular, the relationships between energy
consumption, economic growth and the trade openness have often
been investigated. This study extends the literature about this issue
by focusing on the relationship between energy consumption and
the trade openness. In this study, instead of all energy consump-
tion, renewable energy consumption will be included to obtain
more specific results. The relationship between panels was exam-
ined by Ref. [41] panel cointegration test with multiple structural
breaks [28], CCE-MG coefficient estimator and [14] panel causality
test.
Following the introduction of the study, the literature review is
included in the second section. In the third section, the data and the
method of the study are explained. The empirical results are pre-
sented in the fourth section of the study while the results and
general conclusions are in the fifth and last part.
2. Previous empirical studies
Energy consumption, an important economic variable, has been
seen in many studies with various variables. It is seen that the
research about energy economics mostly analyze the relations be-
tween energy consumption and economic growth
[24,38,1,27,42,45]. In studies related to energy consumption and
economic growth, more general energy consumption data is taken
into consideration as energy variable whereas in some other
studies, renewable energy consumption is taken into consideration
instead of general energy consumption [31,5,25].
Apart from these studies, the relationship between energy
consumption and CO2 emission is found in the literature within the
context of the Environmental Kuznets Curve [6,16,17]. On the other
hand, the number of studies focusing on the relationship between
energy consumption and the trade openness is less, although sig-
nificant work has been done in the literature on the trade openness.
Therefore, the study focuses on energy consumption and the trade
openness, which have serious implications for the economies of the
countries.
Although studies on energy consumption and the trade open-
ness are commonly found in the literature, in these studies, the
energy is either considered as a total sum or focused on traditional
fossil-based energy resources [10,11,26,32e34,36,39,43]. However,
in this study, energy variable was limited and the focus was on the
relationship between renewable energy - trade openness. In this
context, the studies and results in the related literature are sum-
marized below.
[19]; one of the pioneer studies on renewable energy con-
sumption and the trade openness relationship, examined the
relationship between CO2 emissions, economic growth, renewable
energy consumption, non-renewable energy consumption and
trade openness for 25 OECD countries. The study covering the
1980e2009 period used the Pedroni panel cointegration test and
panel Granger causality test. According to the cointegration test
results, a long-term relationship between renewable, non-
renewable energy and commercial factors (export and import)
was detected. According to the results of the causality test, no
findings were found between renewable and non-renewable en-
ergy and commercial factors (export and import).
[35] investigated the causality between economic growth,
renewable energy consumption, CO2 emissions and trade openness
in BRICS countries. The study covering the period 1971e2010
(1992e2010 for Russia) used the ARDL boundary test and VECM
methods. According to the findings obtained, there was cointe-
gration among the variables, and the existence of a two-way cau-
sality relationship between the renewable energy consumption and
the trade openness for Brazil and India was determined.
324 F. Zeren, H.T. Akkuş / Renewable Energy 147 (2020) 322e329
[44] investigated short and long term causality relationships
between CO2 emissions, economic growth, renewable energy
consumption, and trade openness and population density. In the
study conducted on Iran, ARDL boundary test and VECM Granger
causality test were applied. According to the results of the study,
cointegration between the trade openness and the use of renew-
able energy was found and the short term the causality from trade
openness to the renewable energy was seen.
[4] investigated the effects on CO2 emission of economic
growth, urbanization, trade openness, financial development and
renewable energy in 23 European countries. In the study, five
renewable electricity generation sources were used: combustible
renewable energy and waste generation, hydropower generation,
nuclear production, solar energy production and wind energy
production. According to the results of the study conducted be-
tween 1990 and 2013, there was a cointegration between the trade
openness and renewable energy consumption. Moreover, according
to the results of the Granger causality test, causality from the trade
openness to the renewable energy was detected.
[40] investigated the relationship between renewable energy,
environment pollution, foreign trade and economic growth in a
survey of 24 countries with 12 high-income and 12 middle-income
levels. In the study, the period 1990 to 2011 was included and GMM
estimator was used for the analysis. According to the findings, there
were two-way causality between trade openness and renewable
energy for China, Sweden and UK.
[2] examined the determinants of renewable energy consump-
tion in his study and included 12 Balkan countries. According to the
study using the GMM estimator, the trade openness was found to
have a positive effect on the renewable energy consumption for the
Balkan countries.
[12] investigated the effects of real income, renewable and non-
renewable energy, and carbon emission levels in the Environmental
Kuznets Curve (EKC) model on EU-15 countries. In the study of
1980e2012, panel LM bootstrap cointegration and Dumitrescu-
Hurlin panel Granger causality test were used. According to the
result of the study, there was a cointegration relation between
renewable energy and trade openness, but there was no causality.
[13] examined the impact of real output, renewable and non-
renewable energy, trade and financial developments on carbon
emissions on 23 top-level renewable energy countries. The study
using Pedroni, Kao and LM Bootstrap panel cointegration tests
covered the years 1985e2011. According to the results of the study,
it was found that the variables of trade openness and renewable
energy are cointegrated in the long run.
[37] tested the validity of the ECC hypothesis in the presence of
biomass energy consumption, oil prices and trade openness from
renewable energy sources in the US during the period 1960e2016.
In the study, ARDL bound test, Johansen cointegration test and
VECM-Granger causality test were used. According to findings of
the study, besides the relationship between biomass energy con-
sumption and trade openness and the trade openness, there was
also a one-way causality relationship from trade openness to
biomass energy consumption.
The summary of the studies mentioned above is listed in Table 1;
When studies are examined in Table 1, it is generally seen that
the relationship between renewable energy consumption and trade
openness are investigated together with other economic variables.
Explanations on existing studies show that renewable energy
consumption and economic growth or CO2 emissions are at the
forefront, whereas the relationship between renewable energy
consumption and trade openness are not adequately studied, and
detailed explanations on the issue cannot be seen. In addition,
when the findings in Table 1 are examined in detail, there is a
cointegration relation between the variables, and there is a causal
relationship which is predominantly from trade openness to
renewable energy consumption.
3. Data and methodology
When Table 1 is examined, it is seen that the frequencies of the
data are used annually in all studies. In this context, the annual data
are used in this study in parallel with the studies in the literature
and based on the 1980e2015 data range. The countries used in the
study were selected from “Top Emerging Countries of Bloomberg”.
These countries are Brasil, Chile, Colombia, India, Indonesia,
Malaysia, Mexico, Morocco, Peru, Philippinnes, South Africa, South
Korea, Thailand and Turkey. The data of Renewable energy con-
sumption (% of total final energy consumption), Non-Renewable
energy consumption (% of total final energy consumption) and
the current account balance (% of GDP) were obtained from the
World Bank database. During the analysis, both energy consump-
tions and trade openness data was not subject to any trans-
formation due to its proportional structure.
The use of current account balance as a percentage of GDP is
evidence of the economic development of countries. GDP is only
used as the single explanatory variable to avoid both the problem of
multicollinearity and the main indicator of many macroeconomic
and social variables instead of using variables such as exchange rate
and savings. Another reason to use GDP as single explanatory var-
iable is that this paper focuses on whether renewable energy
consumption reduces the deficit, instead of a work that sets out the
causes of the current account deficit. The possible negative rela-
tionship will reveal that renewable energy use should be supported
to reduce the current account deficit.
There are some advantages of choosing panel data analysis
instead of time series in econometric applications. Some of these
advantages are to be able to evaluate using less data and to make a
common judgment on more than one country or company. The fact
that the data have both cross section and time dimension is the
main advantage of using panel data analysis.
In this study, the first step in determining the relationship be-
tween the panels is to investigate the cross-section dependence.
Accordingly [29], CDLMadj test statistic, which can obtain reliable
results by adding variance and mean to the test statistics in cases
where the individual average is different from zero, is calculated as
follows:
"   !

1=2 N1
X X N T  K  1 pij mTij
2
LMadj ¼ p2ij
NðN  1Þ
i¼1 i¼iþ1
gtij
!#
 N 0; 1
(1)
here, mTij represents the mean and gTij represents the variance. This
model will not show any misleading test statistics in case of
possible deviations from the mean and the results will be more
reliable than the results of [8] CDLM test. The null hypothesis of this
test developed by Ref. [29] indicates that there is no cross-section
dependence on panel and the alternative hypothesis suggests the
presence of cross-sectional dependence on the panel.
The CADF panel root test statistics, which is used to determine
the stationarity of the panels, are calculated as follows:
yit ¼ ai þ bi yi; t1 þ ci yi; t1 þ di Dy t þ eit (2)
The CADF test is the version of the IPS test that accepts the ex-
istence of cross-sectional dependence. The null hypothesis of the
 F. Zeren, H.T. Akkuş / Renewable Energy 147 (2020) 322e329 325

Table 1
Literature review.

Source Sample (Countries) Period (Frequency) Econometric Method Empirical Findings

Cointegration Causality

[19] 25 OECD Countries 1980e2009 Conventional Panel Unit Root Test RE ¼ TO RE s TO

(annual) Pedroni Panel Cointegration Test
FMOLS and DOLS Panel Cointegration Estimator
Panel Granger Causality Test
[35] BRICS Countries 1971e2010 ADF and Zivot-Andrews Unit Root Test RE ¼ TO TO 4 RE (For Brazil and India)
(annual) ARDL Bound Test
FMOLS and DOLS Cointegration Estimator
VECM-Granger Causality Test
[44] Iran 1975e2011 ADF and PP Unit Root Test RE ¼ TO TO / RE
(annual) ARDL Bound Test
VECM-Granger Causality Test
[4] 23 European Countries 1990e2013 IPS, ADF-Fisher and PP-Fisher Panel Unit Root RE ¼ TO TO / RE
(annual) Test
Pedroni Panel Cointegration Test
FMOLS Panel Cointegration Estimatior
VECM-Granger Causality Test
[40] 24 High-and Middle-Income 1990e2011 LLC and IPS Panel Unit Root Test n/a TO 4 RE (For China, Sweden and
Countries (annual) GMM Estimation Method England)
[2] 12 Balkan Countries 1998e2011 IPS Panel Unit Root Test n/a TO / RE
(annual) System-GMM method
[12] EU-15 Countries 1980e2012 CD test, CADF and CIPS Panel Unit Root Test RE ¼ TO RE s TO
(annual) LM bootstrap Panel Cointegration Test
FMOLS and DOLS Cointegration Estimatior
Dumitrescu-Hurlin Panel Causality Test
[13] 23 Top Renewable Energy Countries 1985e2011 CD testi, CADF and CIPS Panel Unit Root Test RE ¼ TO n/a
(annual) LM bootstrap Panel Cointegration Test
FMOLS and DOLS Panel Cointegration
Estimatior
[37] USA 1960e2016 NG-Perron Unit Root Test RE ¼ TO TO / RE
(annual) ARDL Bound Test
Johansen Cointegration Test
VECM-Granger Causality Test

Note: RE represents renewable energy consumption and TO represents trade openness. In addition, "/" sign indicates one way causality relation, "4" sign indicates two way
causality relation, "s" sign indicates that there is no causality, and ¼ sign indicates long run cointegration.

test indicates the presence of a unit root in the panel, while the
alternative hypothesis shows that the panel has a static structure.
After the preliminary tests such as cross-sectional dependence,
unit root analysis [41], panel cointegration test, which investigates
the long-term relationship between the panels in the study, pro-
vides the possibility to perform the analyzes by taking multiple
structural breaks into account. The advantage of the method is that
the number of structural breaks is not determined by the
researcher but by the model according to the structure of the data
of interest. This test can be used in cases where there is a cross-
sectional dependence and no cross-sectional dependence. The
test provides results for both cases [41]. cointegration test statistics
are calculated as follows:
! are stationary at different levels. The difference between these two
I_ þ1
TIj_
1 X X X
N M
S2it
ZðMÞ ¼ ,  2
N i¼1 j¼1 t¼Tij1 þ1 Tij  Tij1 s2_
I study [14], causality test was used for the panels, taking the cross
P
t
here the symbol Sit can be expressed as Wst and is the
s¼Tij1 þ1
vector of residues obtained from an effective estimator, similar to
the fully modified least squares (FMOLS) method. The null hy-
pothesis of this test shows that the panels have a long-term co-
integrated structure, while the alternative hypothesis shows that
there is no cointegration relationship between the panels.
On the other hand, it is possible to obtain information about the
direction and coefficient of this long-term relationship between the
panels where the cointegration relationship is detected. In this
respect, the test statistics of [28] Common Correlated Effects (CCE)
Mean Group panel cointegration estimator are calculated as
follows.
b 1 XN
b
b¼ b (4)
N i¼1 i
It is possible to mention several causality tests used in the
literature on panel data econometrics. These are GMM test, which is
used when the cross section size is larger than the time dimension
[14,15], tests, which are used when the time dimension is larger
than the cross section size. Since the time dimension of this study is
larger than the cross section size, it is appropriate to use one of the
[15] or [14] tests. The [14] test is used when all the series are sta-
tionary at the same level, while the [15] test is used when the series
tests is not distant from the difference between the traditional
(3) Granger causality test and the Toda-Yamamoto causality test. In this
section dependency into account, the time dimension being larger
than the cross section size and all the series being stationary at the
same level.
According to this test, the zero hypothesis points to the absence
of a homogeneous causality relationship in the panel, and the
alternative hypothesis points to the existence of heterogeneous
causality in at least one cross section. The zero hypothesis to be
considered here is to investigate the existence of a homogeneous
relationship while the alternative hypothesis explores the existence
of a heterogeneous structure.
In addition, another feature of this technique is that it has high
performance in model with very low data and unbalanced panel
data models. The test statistic used to test the zero hypothesis in
326 F. Zeren, H.T. Akkuş / Renewable Energy 147 (2020) 322e329
this analysis is the simple average of individual Wald statistics [9].
That is;
1 XN
W Hnc
N;T ¼ W (5)
N i¼1 i;t
where, Wi,t, represents the Wald test statistic used to test the
causality for the country [14]. recommend using estimated stan-
dardized statistics for WHnc, using estimates for the mean and
variance of the unknown distribution, since individual Wald sta-
tistics for small values of T do not converge to the same chi-square
distribution. This statistic is calculated as below.
pffiffiffiffi h Hnc PN  i
N W N;T  i¼1 E Wi;t
Z HNC ¼ rffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffi
N;T
PN  
i¼1 Var Wi;t
where i is the total number of countries; W, Wald Statistic; T is the
number of periods.
The growth hypothesis is valid in case there is unidirectional
causality from renewable or non-renewable energy consumption to
trade openness; the neutrality hypothesis is valid when there is
evidence of the unidirectional causality from trade openness to
renewable and non-renewable energy consumption; and the
feedback hypothesis is confirmed in a situation when there is
bidirectional causal linkage between energy consumption and
trade openness.
4. Empirical results
The study of the relationships between the variables included in
the study was carried out by means of panel data analysis. In this
context, some preliminary tests such as cross-sectional dependence
and unit root analysis are required to reveal these relations. The
first analysis to be carried out in panel data analysis is to investigate
whether there is a cross-sectional dependency. Therefore, whether
there is a cross-sectional dependence between the time series in
the panels has been investigated in the literature with various
studies.
[8] CDLM test was used to investigate the existence of cross
section dependency when the group mean values were zero in the
studies conducted until 2008, but the findings were not reliable
when the individual averages were different from zero. Through
the studies of [29]; this shortcoming was eliminated by adding the
variance and the mean to the test statistic.
Therefore, the study used the CDLMadj test, which gives the new
cross section dependency test statistic. According to the findings in
Table 2, the CDLM test of [8] pointed out the existence of cross
section dependence with 99% confidence and in two panels and
95% reliability in one panel, whereas [29] showed the presence of
cross section dependency with 99% reliability in all panels. Findings
of the CDLMadj test, developed by Ref. [29]; were more powerful in
terms of reliability, although the two tests described gave approx-
imately similar results.
According to the results obtained from Table 2, methods
Table 2
Cross section dependence test results.
CDLM p-value CDLMadj
Renewable Energy 110.01 0.07* 17.59
Non-Renewable Energy 135.57 0.00*** 24.02
Trade Openness 161.89 0.00*** 4.60
Note: * 90% and *** 99% levels are significant.
considering cross section dependency, i.e. second generation unit
root, cointegration and causality tests, should be used. In such a
case the first analysis is to be a second-generation panel unit root
examination.
According to the CIPS statistics obtained from the cross-
sectionally augmented Dickey-Fuller (CADF) test in Table 3, each
panel has a unit root in the level forms, and this panel becomes
stationary as a result of the first difference taking.
When they are stationary in the first difference of panels, it is
suitable to investigate the cointegration relationship between
panels. In this study [41], panel cointegration test, which considers
cross section dependence and multiple structural breaks, will be
used. In the test of [41]; the asymptotic p-value in the absence of
cross section dependency is used to determine the presence of
(6) cointegration relation while in cases where cross section de-
pendency is present, the bootstrap p-value is used. In this study, the
values of the bootstrap p-value are taken into consideration
because the cross section dependency is present in both panels.
As can be seen in Table 4, Westerlund cointegration test results
differ in cases where cross section dependence is present or not.
When the CDLM test results are included, it is recommended that
the cointegration evaluation be performed according to the boot-
strap p-value. According to this, while Renewable Energy and Trade
Openness have a statistically significant relationship with long-
term 99% reliability, Non-Renewable Energy and Trade Openness
have statistically significant relationship with 90% reliability.
However, if the asymptotic p-value values were taken into account,
the finding would be that there was no cointegration for both
matches. For this reason, it is very important that a model
considering cross section dependency is used. Another important
point to note here is that the zero hypothesis has been accepted as
the Westerlund cointegration test is functioning in the opposite
logic. That is, the acceptance of the null hypothesis points to the
existence of cointegration.
On the other hand, the number and date of breaks in the test are
presented in Table 5. Accordingly, it is seen that countries generally
have three structural breaks. A structural break is approximately
observed every ten years. Even if the structural breaks follow a
course parallel to the financial liberalization, these structural
breaks stem from the fluctuations in the economic and political
structures of the countries.
[28] Common Correlated Effects (CCE) panel cointegration
estimator was used to determine the direction of cointegration for
these variables, which were found to be parallel in the long-term.
The reason for using this method is that it considers the cross
section dependency contrary to the methods such as DOLS and
FMOLS that do not consider the cross section dependency. The
results are presented in Table 6.
According to the findings, the cointegration between renewable
energy and trade openness is negative direction, while the rela-
tionship between non-renewable energy and trade openness is
positive direction. Accordingly, the increase in renewable energy
consumption decreases trade openness of emerging countries,
whereas the use of non-renewable energy increases the trade
Table 3
CADF unit root test results.
CIPS CIPS in 1st
Renewable Energy 2.92 5.12***
p-value
Non-Renewable Energy 1.93 4.54***
0.00*** Trade Openness 3.08 5.28***
0.00***
Note: *** 99% reliability is significant. The critical values were taken from the [28]
0.00***
“Simple Panel Unit Root Test in The Presence of Cross-Section Dependence” by
considering the country and time dimension for each panel.
 F. Zeren, H.T. Akkuş / Renewable Energy 147 (2020) 322e329 327

Table 4
Westerlund cointegration with multiple break test results.

LM Statistics Asymptotic p-value Bootstrap p-value

Renewable Energy vs Trade Openness 93.38 0.00 0.118***

Non-Renewable Energy vs Trade Openness 299.07 0.00 0.037*

Note: * 90% and *** 99% levels are significant.

Table 5
Structural break dates of Westerlund cointegration test.

Renewable Energy vs Trade Openness Non-Renewable Energy vs Trade Openness

Brazil 1982 1989 2000 2008 Brazil 1981 1995 1998 e

Chile 1981 1991 1999 e Chile 1981 1991 1999 e
Colombia 1980 1986 e Colombia 1981 1996 2008 e
India 1981 1988 2004 e India 1981 1989 2000 e
Indonesia 1980 1988 e Indonesia 1981 1986 1996 e
Malaysia 1981 1989 2001 e Malaysia 1982 1988 1996 2008
Mexico e e e e Mexico 1981 1989 2007 e
Morocco e e e e Morocco 1980 1986 e e
Peru 1981 1987 1999 e Peru 1981 1994 2003 e
Philippines 1981 1986 1998 e Philippines 1982 1991 1998 2005
S. Africa 1980 1991 e e S. Africa 1982 1987 1998 2007
S. Korea 1981 1993 2004 e S. Korea 1981 1986 1993 e
Thailand e e e e Thailand 1982 1986 1994 2003
Turkey 1980 1986 e e Turkey 1980 1998 e e

Table 6
CCE mean group estimation results.

Coefficient Standard Dev. Tstat

Renewable Energy vs Trade Openness 1.84218 1.356897 1.28685

Non-Renewable Energy vs Trade Openness 0.757963 1.356901 0.597654

openness. Moreover, the increase in trade openness decreases the Table 7

renewable energy consumption and increases the non-renewable
energy consumption of emerging countries. In other words, the
solution to the problem of trade openness is the use of renewable
energy instead of non-renewable energy.
The positive effect mentioned here can be explained as the
emergence of the trade openness with the energy costs arising
from the high energy needs of the emerging countries. However,
the increased current economic situation with the trade openness
and the resulting need for energy consumption explains this pos-
itive relationship. Nevertheless, the fact that non-renewable energy
is limited unlike renewable energy explains the positive relation.
Because emerging countries that do not have non-renewable en-
ergy sources are providing this energy need from the outside. These
costs increase the trade openness with this energy needs.
On the other hand, the negative effect is called the technical
effect in the literature. Trade openness allows emerging economies
to import advanced technologies from developed economies. The
adoption of advanced technology in this way reduces the energy
intensity. In addition, thanks to advanced technology applications,
instead of non-renewable energy, the use of more renewable en-
ergy and the establishment of facilities that will enable the pro-
duction of renewable energy can reduce the trade openness.
Following the investigation of the cointegration relationship
and cointegration coefficients, the next analysis was based on
causality. Table 7 shows the results of the Dumitrescu Hurlin panel
causality test, which is the most appropriate choice in such a sit-
uation where each panel is stationary at I (1) level and cross section
dependency is on the panels.
According to the obtained findings, non-renewable energy is the
cause of the trade openness and trade openness is the cause of
renewable energy. In other words, while non-renewable energy
Dumitrescu Hurlin panel causality test results.
W-Stat. Zbar-Stat. Prob.
Renewable Energy ≫ Trade Openness 2.63 0.97 0.38
Non-Renewable Energy ≫ Trade Openness 1.89 1.92 0.07*
Trade Openness ≫ Renewable Energy 3.69 2.48 0.03**
Trade Openness ≫ Non-Renewable Energy 0.58 1.22 0.25
Note: * % 90 and ** % 95 levels are significant.
consumption triggers the trade openness, the trade openness
triggers the use renewable energy in order to reduce this openness.
Non-renewable energy consumption is the main cause of trade
openness in this emerging economics. To become more specific, as
the emerging countries in the study do not have enough non-
renewable energy sources, the cost of imported energy from
abroad increases the trade openness. However, the fact that the
countries involved in the study have a developing structure re-
quires that their economic growth rates are higher than those of the
developed countries, and this economic growth can also be ach-
ieved through more energy consumption. So more energy con-
sumption is one of the factors that helps to grow economically.
However, the economic growth provided by this energy use also
increases the trade openness.
On the other hand, the trade openness increases economic ac-
tivity, thus encouraging domestic production and hence economic
growth. The increase in domestic production is reshaping energy
demand due to the expansion in domestic demand. The trade
openness allows emerging economies to import advanced tech-
nologies from developed economies. These advanced technology
applications trigger the establishment of renewable energy plants,
renewable energy production and increase the use of renewable
328 F. Zeren, H.T. Akkuş / Renewable Energy 147 (2020) 322e329
energy. In other words, this interaction explains why the trade
openness is the cause of renewable energy.
5. Concluding remarks
Energy consumption and the trade openness are two important
macroeconomic variables used as indicators of the socio-economic
development of countries. However, although these two important
variables have been studied extensively in relation to different
macroeconomic variables, the studies in which these variables are
studied together in depth have not been adequately found.
Renewable energy sources such as water power (hydropower),
biomass energy, solar energy, wind energy, geothermal energy and
wave energy can be used as they are from nature, and their envi-
ronmental sensitivity is higher than traditional energy sources. In
addition, unlike conventional energy sources such as coal, oil and
natural gas, which are formed in millions of years, limited, and not
homogeneously distributed throughout the world, renewable en-
ergy sources are theoretically unlimited.
The aim of this study is to uncover the relationship between use
of renewable energy and trade openness for the 14 countries
identified as “Top Emerging Countries” by Bloomberg. Annual data
covering the period 1980e2015 were used in the study. In addition,
the relationship between the variables was investigated by Ref. [14]
panel causality test [41], panel cointegration test with multiple
structural break and [28] CCE-MG panel cointegration coefficient
estimator. The results obtained using these methods enable the
measurement of the effect of renewable energy use on the current
account deficit. Thus, an alternative solution is presented to the
problem of importing energy which has a negative effect on other
macroeconomic indicators. Although the acquisition of renewable
energy systems is initially more costly, it is estimated that they will
provide a significant advantage to reduce trade openness due to
their unlimited sources. For this reason, policy makers will be able
to avoid multiple problems such as external dependence on energy,
environmental pollution and current account deficit by following a
policy of supporting renewable energy production which may be
more costly at the beginning. In this way, policy makers will have
the possibility of sustainable economic growth.
The [41] panel cointegration test with multiple structural breaks
used in the study shows a statistically significant relationship be-
tween Renewable Energy and Trade Openness as well as a long-
term relationship between Non-Renewable Energy and Trade
Openness. The obtained cointegration findings are consistent with
the results of all studies in the literature. In addition, according to
Ref. [28] CCE-MG panel cointegration coefficient estimator
considering cross section dependency, the cointegration between
Renewable energy and trade openness is negative, while the rela-
tionship between non-renewable energy and trade openness is
positively correlated. Thus, increasing the renewable energy con-
sumption of the emerging countries in the study will reduce the
trade openness, while the use of non-renewable energy will in-
crease the trade openness. According to Ref. [14] panel causality
test results in the study, the use of non-renewable energy is the
reason for the trade openness whereas the trade openness is the
cause of the use of renewable energy. In other words, while con-
sumption of non-renewable energy triggers the trade openness, the
trade openness results in the triggering of the use of renewable
energy in order to reduce this openness. The finding that non-
renewable energy use is the reason for the trade openness for
emerging countries is in line with expectations. On the other hand,
the finding that triggers the use of renewable energy in the trade
openness is in line with the results of the study in Refs. [2,4,44] and
[37].
The empirical findings of causality between renewable energy
consumption and trade openness indicate that the neutrality hy-
pothesis is valid, while the findings of the relationship between
non-renewable energy and trade openness indicate that the
energy-led growth hypothesis is valid for these counties.
The results of the study provide important information on how
to increase the use of renewable energy for a sustainable economy
in the long term for decision-makers, as well as for investors on the
future of energy-related investments. However, as it is known, the
initial costs of energy investments are very high. This means that
countries must either undertake these investments or encourage
them directly or indirectly. It should also be known that advanced
technologies, which are the result of these investments, can be an
important element that can be exported to other countries. This
technology transfer will emerge as a serious factor that will reduce
the trade openness. It is also important to note that the use of
environmentally sensitive renewable energy sources instead of
conventional energy sources that are harmful to the environment is
crucial.
In future works, it will be possible to obtain deeper findings by
considering renewable energy sources such as water resources
(hydraulic energy), biomass energy, solar energy, wind energy,
geothermal energy and wave energy. On the other hand, the studies
to be conducted by taking into account the variables such as CO2
emissions and energy imports will reveal valuable findings.
Moreover, by separating the positive and the negative shocks, new
tests can be applied to eliminate the asymmetric behavioral dif-
ferences in the variables. These methods are listed in the literature
as Hatemi-J Panel Hidden Cointegration Test and Panel Asymmetric
Causality Test.
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