The Impact of Renewable Energy and Energy Imports on the Current Account Balance: Panel Data Analysis

This study investigates the impacts of renewable energy usage on current account balance. The share of energy import in foreign trade activities of countries has been increasing day by day. Besides, many countries design various policies to raise their self-efficacy by reducing their dependence on energy imports. Making the production and consumption of renewable energy widespread will make it possible to build a sustainable future as well as having a potential to reduce energy import. Thus, positive impacts might be observed in the current account balance. From this point of view, in the present study, a panel data analysis for 123 countries over the 2000-2014 period was performed. According to the findings, the use of renewable energy has a positive impact in OECD countries while having a negative impact in non-OECD group. This is due to the relatively higher use of conventional energy types in non-OECD countries. Moreover, since the infrastructure investments in renewable energy mostly depend on imports, it is not surprising to not observe the positive outcomes of renewable energy usage in the current account balance of non-OECD countries in the first 15 years of the 2000s. In addition to the impact of renewable energy usage, the impacts of energy import and nominal exchange rate on current account balance are observed as negative and positive respectively.