Fiscal decentralization as new determinant of renewable energy demand in China: The role of income inequality and urbanization

Abstract

This paper examines the nexus between fiscal decentralization and renewable energy demand by including income inequality, economic growth, urbanization, and economic globalization as the main determinants in the energy demand function for the case of China. Quarterly frequency data for the period 1980–2018 are used for empirical analysis. Our empirical results show fiscal decentralization positively impacts the demand for renewable energy; in other words, fiscal decentralization can help increase renewable energy demand. In addition, income inequality is negatively linked to renewable energy consumption, while economic growth is positively associated with renewable energy demand. Urbanization and economic globalization add to renewable energy consumption. This study presents Chinese authorities with new guidelines for using fiscal decentralization as an economic tool to formulate effective energy policies for long-term development of the use of renewable energy sources.