IDEAS home Printed from https://ideas.repec.org/a/gam/jsusta/v17y2025i17p7811-d1737769.html
   My bibliography  Save this article

The Impact of Renewable Energy Diversity on Inflation: A Case Study Based on China

Author

Listed:
  • Ayşe Arı

    (Department of Economics, Faculty of Economics and Administrative Sciences, Mersin University, Mersin 33343, Türkiye)

  • Jørgen T. Lauridsen

    (Department of Economics, Faculty of Business and Social Science, University of Southern Denmark, 5230 Odense, Denmark)

Abstract

The rise in energy prices due to global uncertainties and risks is accelerating the transition to renewable energy in countries. It is expected that embracing energy diversity instead of dependence on a single energy source, such as oil, will curb energy-related increases in inflation. In this study, the impact of the transition to renewable energy on inflation is investigated using the energy diversification index. For this purpose, the Chinese economy is analyzed with the Augmented ARDL method. According to the long-term results of the analysis covering the 1991–2023 period, the effect of energy diversity on inflation is negative. The study also examined the effect of composing an energy portfolio consisting of various renewable energy sources rather than a single renewable energy source on inflation. According to the results obtained, renewable energy diversity has a negative effect on inflation, too. As a result, inflation is expected to decrease as renewable energy diversification and overall energy diversification increase. In sum, inflation can be expected to fall when authorities increase both renewable energy diversity and overall energy diversity instead of solely depending on oil or any renewable energy source.

Suggested Citation

  • Ayşe Arı & Jørgen T. Lauridsen, 2025. "The Impact of Renewable Energy Diversity on Inflation: A Case Study Based on China," Sustainability, MDPI, vol. 17(17), pages 1-21, August.
    • Handle: RePEc:gam:jsusta:v:17:y:2025:i:17:p:7811-:d:1737769
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2071-1050/17/17/7811/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/2071-1050/17/17/7811/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Sikdar, Asaduzzaman & Kundu, Nobinkhor & Khan, Zakir Saadullah, 2013. "Trade openness and inflation: A test of Romer hypothesis for Bangladesh," MPRA Paper 65244, University Library of Munich, Germany, revised 16 Oct 2013.
    2. Ondřej Bednář & Andrea Čečrdlová & Božena Kadeřábková & Pavel Řežábek, 2022. "Energy Prices Impact on Inflationary Spiral," Energies, MDPI, vol. 15(9), pages 1-25, May.
    3. Łukasz Markowski & Kamil Kotliński, 2023. "Renewables, Energy Mix and Inflation in the European Union Countries," Energies, MDPI, vol. 16(23), pages 1-15, November.
    4. Qing Wang & Kefeng Xiao & Zhou Lu, 2020. "Does Economic Policy Uncertainty Affect CO 2 Emissions? Empirical Evidence from the United States," Sustainability, MDPI, vol. 12(21), pages 1-11, November.
    5. Paresh Kumar Narayan & Seema Narayan & Sagarika Mishra, 2011. "Do Remittances Induce Inflation? Fresh Evidence from Developing Countries," Southern Economic Journal, Southern Economic Association, vol. 77(4), pages 914-933, April.
    6. Crump, Richard K. & Eusepi, Stefano & Giannoni, Marc & Şahin, Ayşegül, 2024. "The unemployment–inflation trade-off revisited: The Phillips curve in COVID times," Journal of Monetary Economics, Elsevier, vol. 145(S).
    7. Choi, Sangyup & Furceri, Davide & Loungani, Prakash & Mishra, Saurabh & Poplawski-Ribeiro, Marcos, 2018. "Oil prices and inflation dynamics: Evidence from advanced and developing economies," Journal of International Money and Finance, Elsevier, vol. 82(C), pages 71-96.
    8. Paresh Kumar Narayan & Seema Narayan & Sagarika Mishra, 2011. "Do Remittances Induce Inflation? Fresh Evidence from Developing Countries," Southern Economic Journal, John Wiley & Sons, vol. 77(4), pages 914-933, April.
    9. Mohammad Rifat Rahman & Md. Mufidur Rahman & Roksana Akter, 2023. "Renewable energy development, unemployment and GDP growth: South Asian evidence," Arab Gulf Journal of Scientific Research, Emerald Group Publishing Limited, vol. 42(3), pages 1044-1059, August.
    10. Tri Wahyu Adi & Edy Susanto & Ade Caswito & R. Sapto Yuwono & Tarwaji Warsokusumo & A. Y. Agung Nugroho, 2024. "Influence of Fossil Fuel Prices on Fossil and Renewable Electricity Consumptions, GDP, Inflation and Greenflation: A Case Study in the Asia Pacific Countries," International Journal of Energy Economics and Policy, Econjournals, vol. 14(4), pages 48-56, July.
    11. Akan, Taner, 2023. "Can renewable energy mitigate the impacts of inflation and policy interest on climate change?," Renewable Energy, Elsevier, vol. 214(C), pages 255-289.
    12. Lenka Vyrostková & Ervin Lumnitzer & Anna Yehorova, 2024. "Renewable Energy in the Eurozone: Exploring Macroeconomic Impacts via FMOLS," Energies, MDPI, vol. 17(5), pages 1-18, February.
    13. Shahbaz, Muhammad & Raghutla, Chandrashekar & Chittedi, Krishna Reddy & Jiao, Zhilun & Vo, Xuan Vinh, 2020. "The effect of renewable energy consumption on economic growth: Evidence from the renewable energy country attractive index," Energy, Elsevier, vol. 207(C).
    14. Ha,Jongrim & Kose,Ayhan & Ohnsorge,Franziska Lieselotte & Yilmazkuday,Hakan, 2023. "Understanding the Global Drivers of Inflation : How Important Are Oil Prices ?," Policy Research Working Paper Series 10283, The World Bank.
    15. Chen, Zhan-Ming, 2014. "Inflationary effect of coal price change on the Chinese economy," Applied Energy, Elsevier, vol. 114(C), pages 301-309.
    16. Gozgor, Giray & Paramati, Sudharshan Reddy, 2022. "Does energy diversification cause an economic slowdown? Evidence from a newly constructed energy diversification index," Energy Economics, Elsevier, vol. 109(C).
    17. Paresh Kumar Narayan, 2005. "The saving and investment nexus for China: evidence from cointegration tests," Applied Economics, Taylor & Francis Journals, vol. 37(17), pages 1979-1990.
    18. Thellufsen, Jakob Zinck & Lund, Henrik & Mathiesen, Brian Vad & Østergaard, Poul Alberg & Sorknæs, Peter & Nielsen, Steffen & Madsen, Poul Thøis & Andresen, Gorm Bruun, 2024. "Cost and system effects of nuclear power in carbon-neutral energy systems," Applied Energy, Elsevier, vol. 371(C).
    19. Nihal Ahmed & Adnan Ahmed Sheikh & Farhan Mahboob & Muhammad Sibt e Ali & Elżbieta Jasińska & Michał Jasiński & Zbigniew Leonowicz & Alessandro Burgio, 2022. "Energy Diversification: A Friend or Foe to Economic Growth in Nordic Countries? A Novel Energy Diversification Approach," Energies, MDPI, vol. 15(15), pages 1-15, July.
    20. Zhang, Long & Padhan, Hemachandra & Singh, Sanjay Kumar & Gupta, Monika, 2024. "The impact of renewable energy on inflation in G7 economies: Evidence from artificial neural networks and machine learning methods," Energy Economics, Elsevier, vol. 136(C).
    21. Deheri, Abdhut & Ramachandran, M., 2023. "Does Indian economy asymmetrically respond to oil price shocks?," The Journal of Economic Asymmetries, Elsevier, vol. 27(C).
    22. Muhammad Tahir & Norulazidah Omar Ali & Imran Naseem & Umar Burki, 2023. "Trade Openness and Inflation Rate in China: Empirical Evidence from Time Series Data," Economies, MDPI, vol. 11(10), pages 1-10, September.
    23. Punzi, Maria Teresa, 2019. "The impact of energy price uncertainty on macroeconomic variables," Energy Policy, Elsevier, vol. 129(C), pages 1306-1319.
    24. M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
    25. Liu, Bofan & Olayinka, Olohunlana Aminat & Sofuoğlu, Emrah & Abbas, Shujaat & Sinha, Avik, 2023. "Should Asia Pacific economic cooperation countries put all their eggs in one energy basket? Examining the linkage between energy diversification and sustainable development," Energy Policy, Elsevier, vol. 179(C).
    26. David Romer, 1993. "Openness and Inflation: Theory and Evidence," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 108(4), pages 869-903.
    27. Moussa, Richard K. & Ousseini, Bouba & Taha, Cyrille K., 2024. "Asymmetric effects of oil prices on inflation in Côte d’Ivoire," Resources Policy, Elsevier, vol. 90(C).
    28. Abubakar, Attahir B. & Karimu, Suale & Mamman, Suleiman O., 2024. "Inflation effects of oil and gas prices in the UK: Symmetries and asymmetries," Utilities Policy, Elsevier, vol. 90(C).
    29. Barsha Nibedita & Mohd Irfan, 2023. "The Dynamic Nexus Among Energy Diversification and Carbon Emissions in the E7 Economies: Investigating the Moderating Role of Financial Development," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 59(14), pages 3968-3981, November.
    30. Thanh Nguyen & Son Nghiem & Anh-Tuan Doan, 2025. "Energy diversification, financial development and economic development: an examination of convergence in OECD countries," China Finance Review International, Emerald Group Publishing Limited, vol. 15(2), pages 337-362, March.
    31. Jongrim Ha & M. Ayhan Kose & Franziska Ohnsorge & Hakan Yilmazkuday, 2023. "Understanding the Global Drivers of Inflation:How Important are Oil Prices? ," CAMA Working Papers 2023-03, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    32. Nurkhodzha Akbulaev, 2023. "Analysis of Renewable Energy, Foreign Direct Investment, and CO2 Relationship: Evidence from France, Germany, and Italy," International Journal of Energy Economics and Policy, Econjournals, vol. 13(5), pages 645-657, September.
    33. Toda, Hiro Y. & Yamamoto, Taku, 1995. "Statistical inference in vector autoregressions with possibly integrated processes," Journal of Econometrics, Elsevier, vol. 66(1-2), pages 225-250.
    34. Bettarelli, Luca & Estefania-Flores, Julia & Furceri, Davide & Loungani, Prakash & Pizzuto, Pietro, 2023. "Energy inflation and consumption inequality," Energy Economics, Elsevier, vol. 124(C).
    35. Junsoo Lee & Mark C. Strazicich, 2003. "Minimum Lagrange Multiplier Unit Root Test with Two Structural Breaks," The Review of Economics and Statistics, MIT Press, vol. 85(4), pages 1082-1089, November.
    36. Shazia Kousar & Saeed Ahmad Sabir & Farhan Ahmed & Štefan Bojnec, 2022. "Climate Change, Exchange Rate, Twin Deficit, and Energy Inflation: Application of VAR Model," Energies, MDPI, vol. 15(20), pages 1-21, October.
    37. Sun, Yunpeng & Pal, Shreya & Mahalik, Mantu Kumar & Gozgor, Giray & Lau, Chi Keung Marco, 2024. "Predicting energy source diversification in emerging Asia: The role of global supply chain pressure," Energy Economics, Elsevier, vol. 136(C).
    38. Jayaraj, Nikhil & Klarin, Anton & Ananthram, Subramaniam, 2024. "The transition towards solar energy storage: a multi-level perspective," Energy Policy, Elsevier, vol. 192(C).
    39. Bello Abdullahi MUHAMMAD & Muhammad Shehu SHUAIBU & Mohammad Junaid ALAM & Lawan Nasiru SALISU, 2023. "The Asymmetric Impact of Oil Price Volatility on Nigeria's Inflation," Economics and Applied Informatics, "Dunarea de Jos" University of Galati, Faculty of Economics and Business Administration, issue 3, pages 5-16.
    40. Shahbaz, Muhammad & Siddiqui, Aaliyah & Ahmad, Shabbir & Jiao, Zhilun, 2023. "Financial development as a new determinant of energy diversification: The role of natural capital and structural changes in Australia," Energy Economics, Elsevier, vol. 126(C).
    41. Paresh Kumar Narayan & Seema Narayan & Sagarika Mishra, 2011. "Do Remittances Induce Inflation? Fresh Evidence from Developing Countries," Southern Economic Journal, John Wiley & Sons, vol. 77(4), pages 914-933, April.
    42. Reichenberg, L. & Ekholm, T. & Boomsma, T., 2023. "Revenue and risk of variable renewable electricity investment: The cannibalization effect under high market penetration," Energy, Elsevier, vol. 284(C).
    43. Abebe Aragaw, 2024. "The inflationary effect of the budget deficit: does financial sector development matter?," Journal of Innovation and Entrepreneurship, Springer, vol. 13(1), pages 1-15, December.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Bashier Al-Abdulrazag & Musa Foudeh, 2022. "Does inflation reduce remittance outflows in Saudi Arabia?," Cogent Economics & Finance, Taylor & Francis Journals, vol. 10(1), pages 2141424-214, December.
    2. Nikeel Kumar & Ronald Ravinesh Kumar & Radika Kumar & Peter Josef Stauvermann, 2020. "Is the tourism–growth relationship asymmetric in the Cook Islands? Evidence from NARDL cointegration and causality tests," Tourism Economics, , vol. 26(4), pages 658-681, June.
    3. Kumar, Nikeel Nishkar & Patel, Arvind, 2023. "Nonlinear effect of air travel tourism demand on economic growth in Fiji," Journal of Air Transport Management, Elsevier, vol. 109(C).
    4. Shahiduzzaman, Md. & Alam, Khorshed, 2014. "The long-run impact of Information and Communication Technology on economic output: The case of Australia," Telecommunications Policy, Elsevier, vol. 38(7), pages 623-633.
    5. Lean, Hooi Hooi & Smyth, Russell, 2010. "On the dynamics of aggregate output, electricity consumption and exports in Malaysia: Evidence from multivariate Granger causality tests," Applied Energy, Elsevier, vol. 87(6), pages 1963-1971, June.
    6. Stavros Stavroyiannis, 2022. "Cointegration and ARDL specification between the Dubai crude oil and the US natural gas market," Papers 2206.03278, arXiv.org.
    7. Kumar, Ronald Ravinesh & Kumar, Radika, 2013. "Effects of energy consumption on per worker output: A study of Kenya and South Africa," Energy Policy, Elsevier, vol. 62(C), pages 1187-1193.
    8. Ronald Kumar & Nanthakumar Loganathan & Arvind Patel & Radika Kumar, 2015. "Nexus between tourism earnings and economic growth: a study of Malaysia," Quality & Quantity: International Journal of Methodology, Springer, vol. 49(3), pages 1101-1120, May.
    9. Chor Foon Tang & Eu Chye Tan, 2012. "Electricity Consumption and Economic Growth in Portugal: Evidence from a Multivariate Framework Analysis," The Energy Journal, , vol. 33(4), pages 22-48, October.
    10. Munirul H. Nabin & Sukanto Bhattacharya & Shuddhaswatta Rafiq, 2015. "Mortgage-Backed Securities (MBS): Is It a Curse or a Blessing for the Australian Home Loan Market? A Natural Experiment," Australian Economic Papers, Wiley Blackwell, vol. 54(2), pages 104-120, June.
    11. Serkan GÖKSU, 2024. "Do Increases and Decreases in Non-renewable Energy Consumption Have the Same Effect on Growth in Türkiye?," Sosyoekonomi Journal, Sosyoekonomi Society, issue 32(60).
    12. Mariana Hatmanu & Cristina Cautisanu & Mihaela Ifrim, 2020. "The Impact of Interest Rate, Exchange Rate and European Business Climate on Economic Growth in Romania: An ARDL Approach with Structural Breaks," Sustainability, MDPI, vol. 12(7), pages 1-23, April.
    13. Kumar, Ronald Ravinesh & Stauvermann, Peter Josef & Samitas, Aristeidis, 2016. "The effects of ICT⁎ on output per worker: A study of the Chinese economy," Telecommunications Policy, Elsevier, vol. 40(2), pages 102-115.
    14. Md. Shahiduzzaman & Khorshed Alam, 2014. "A reassessment of energy and GDP relationship: the case of Australia," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 16(2), pages 323-344, April.
    15. Shahbaz, Muhammad & Siddiqui, Aaliyah & Ahmad, Shabbir & Jiao, Zhilun, 2023. "Financial development as a new determinant of energy diversification: The role of natural capital and structural changes in Australia," Energy Economics, Elsevier, vol. 126(C).
    16. Kumar, Ronald Ravinesh & Stauvermann, Peter Josef & Patel, Arvind & Kumar, Radika Devi, 2014. "Exploring the effects of energy consumption on output per worker: A study of Albania, Bulgaria, Hungary and Romania," Energy Policy, Elsevier, vol. 69(C), pages 575-585.
    17. Tan, Yan & Uprasen, Utai, 2023. "Asymmetric effects of oil price shocks on income inequality in ASEAN countries," Energy Economics, Elsevier, vol. 126(C).
    18. Mario Gómez & Aitor Ciarreta & Ainhoa Zarraga, 2018. "Linear and Nonlinear Causality between Energy Consumption and Economic Growth: The Case of Mexico 1965–2014," Energies, MDPI, vol. 11(4), pages 1-15, March.
    19. Adeel Saleem & Maqbool H. Sial & Ahmed Raza Cheema, 2023. "Does an asymmetric nexus exist between exports and economic growth in Pakistan? Recent evidence from a nonlinear ARDL approach," Economic Change and Restructuring, Springer, vol. 56(1), pages 297-326, February.
    20. Tang, Chor Foon & Tan, Eu Chye, 2013. "Exploring the nexus of electricity consumption, economic growth, energy prices and technology innovation in Malaysia," Applied Energy, Elsevier, vol. 104(C), pages 297-305.

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jsusta:v:17:y:2025:i:17:p:7811-:d:1737769. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.