Transition towards sustainable energy: The role of economic complexity, financial liberalization and natural resources management in China

China's sustainable development heavily depends on the nation's capacity to shift from fossil fuel to renewable energy, which can aid in meeting the country's target of attaining carbon neutrality by 2060. Currently, China is a global leader in renewable energy capacity; there is a need to understand the role of some major determinants of renewable energy usage. In this research, we consider it essential to investigate how financial globalization, economic complexity, and natural resources impact China's renewable energy usage, while considering crucial factors such as economic growth and environmental degradation. Annual dataset spanning from 1980 to 2019 and the dynamic autoregressive distributed lag approach for empirical investigation. The empirical outcome suggests that renewable energy is positively influenced by economic complexity, natural resources and economic growth. Furthermore, these results highlight the neutral impact of financial globalization and economic growth on renewable energy in the long run. However, financial globalization negatively impacts renewable energy in the short run. The frequency domain approach was used for the causal interaction test, which established the evidence of causality interaction between renewable energy and its determinants at various time horizons. As a result, policymakers should prioritize product specialization and diversification while pursuing more sophisticated exports.

Automated summary

China's sustainable development relies heavily on transitioning from fossil fuels to renewable energy, and this research aims to investigate the impact of financial globalization, economic complexity, and natural resources on China's renewable energy usage. The empirical results show that economic complexity, natural resources, and economic growth positively influence renewable energy while financial globalization has a negative impact in the short run. Causal interaction tests confirm the relationship between renewable energy and its determinants at different time horizons, emphasizing the need for policymakers to prioritize diversified and specialized exports.