Energy Efficiency, Renewable Energy and Current Account Balance: Econometric Findings and Scenario Analysis for Turkey

Due to environmental and energy security concerns, the efforts of countries to increase their share of renewable energy (NEW) and energy efficiency (ENVER) have become the main axis of energy policies at the global level. In addition to these concerns, these two energy sources are very important for the Turkish economy, as they have the potential to reduce the chronic current account deficit. In this study, using the country data of the World Bank for the period 1990-2018, the relations of YENI and ENVER with net imported energy share (imported energy dependence) and current account balance were tested econometrically (panel data fixed effects model) and scenario analyzes were made for Turkey. Econometric estimates reveal that the increases in NEW and ENVER are statistically related to the decrease in the share of net imported energy and the improvement in the current account balance. The effect of the increase in NEW on the net imported energy share is estimated to be stronger for the middle-income country group such as Turkey and the highly urbanized country group. It has been observed that the reducing impact of the increase in ENVER on the share of net imported energy is more pronounced in the relatively lower income and highly urbanized country groups. The improvement effect of the increase in NEW on the current account balance is more evident in the relatively high-income group and moderately urbanized countries such as Turkey. It is estimated that the improvement effect of the increase in ENVER on the current account balance is more pronounced in high and moderate urbanized countries and middle and high income country groups. The scenario analysis for Turkey, based on the estimation results, reveals that a decrease of up to 21 billion USD in Turkey's current account deficit in 2030 is possible with the reasonable increases to be provided in NEW and ENVER.