Unpacking the role of public debt in renewable energy consumption: New insights from the emerging countries

Highlights: • Investigation of public debt and renewable energy nexus in 20 emerging countries. • Findings were inquired by the Driscoll-Kraay standard errors, FGLS, and PCSE. • Public debt and trade openness reduce the utilization of renewable energy. • Renewable energy consumption has a bidirectional relationship with public debt. In the trend of promoting the use of renewable energy, a vast body of literature dedicates attention to its determinants. However, the effects of public debt on renewable energy utilization are overlooked in the empirical analysis. On the one hand, public debt can be seen as a funding source for environmental protection programs. On the other hand, the high level of public debt could be a barrier to investing in the renewable energy sector. Therefore, our study wishes to contribute to the existing literature by exploring the impact of public debt on renewable energy consumption for the case of 20 emerging countries, where the public debt and demand for renewable energy are increasing. To attain this purpose, the advanced econometric techniques for panel data, which robust to the issue of cross-sectional dependence, are employed for a dataset in the period from 1990 to 2016. As a result, the regression with Driscoll-Kraay standard errors indicates that public debt decreases the renewable energy consumption of the countries under this study. While the Dumitrescu and Hurlin Granger causality test shows bidirectional causal relations between these two variables. Based on the obtained findings, useful policy implications are suggested for emerging countries.