Do the globalization and imports of capital goods from EU, US and China determine the use of renewable energy in developing countries?

Abstract The developing countries rely heavily on imports of capital goods to spur economic growth. When the economy grows, energy consumption rises, adversely impacting climate change. The low levels of renewable energy share in total energy consumption, developing nations confront a difficult task in achieving the SDGs targets related to an increase in renewable energy share and access to affordable, reliable, and modern energy. Finding solutions to increase renewable energy usage is critical. International trade is an unavoidable part of development, prompting us to consider the impact of imports on renewable energy usage. This study explores the effects of imports of capital goods from China, EU and USA on renewable energy consumption in developing countries by using panel data from 20 countries spanning 2000–2018. It is found that capital goods imported from China in developing countries negatively impact renewable energy consumption while imports from EU have a positive impact on renewable energy consumption. However, in the case of US it is found negative but insignificant. The role of economic, social, and political globalization is explored, and it is found that three types of globalization are positively and significantly linked with renewable energy consumption. Thus, this study recommends that trade policies complement domestic efforts toward increasing renewable energy production and consumption in developing countries.


Introduction
For the past few decades, economic growth-oriented human activities seem to be a menace to the established ecosystem in developed and developing countries.Global warming and climate change are serious concerns and the subject of debate among researchers, policymakers, public and private entities around the globe is to identify the primary threats of climate change and global warming to the ecosystem and environment [1,2].According to the Fifth Assessment Report issued by the International Panel on Climate Change, human activities (growth in the economy and pollution led by the industrial revolution) are the primary sources of (Green House Gas) GHG emissions.These emissions are the primary cause of climate change, global warming, rising sea levels, melting ice caps, and floods [3,4].
The overall share of pollution emissions in developing countries is considerably higher than the developed countries.The International Energy Agency (IEA, 2018) confirms in its report that carbon-intense energy resources and economic growth have contributed to the rising levels of ecological footprint in both developed and developing countries.Moreover, the literature reports multiple but related channels such as Globalization [5,6], energy usage (Ang, 2007), R&D investment (Zhu et al. 2016), trade expansion (Faiz-Ur- Rehman et al. 2007), population growth, and urbanization [7]; (Shahbaz and Sinha, 2019) that have played a vital role in the distortion of the established ecosystem in the preceding years.
Countries are increasingly adopting technologies and policies to reduce carbon emissions and remove GHGs from the atmosphere.Most of these policies are in the form of interventions in domestic policies, local regulations and enhancing consumer choices by encouraging environmentfriendly production and consumption.More recently, literature has highlighted the importance of regional integration, particularly international trade, in improving progress towards energy transition and reducing carbon emissions [6,8].Globalization is one factor directly or indirectly linked with human beings and their interactions in social, economic, and political contexts.As the world economy is growing, it is also becoming more integrated over time, leading to industrialization and urbanization, further resulting in environmental degradation [5,9].Many studies [10][11][12][13]; (Shahbaz et al. 2015) survey in detail the impact of globalization on renewable energy consumption.These studies confirm that economic growth and globalization leads to an increase in the demand for non-renewable energy consumption which directly impacts environmental quality [14].Contrary to the prevalent literature globalization positively affect renewable energy consumption if financial investment encourages research and development activities through green energy and environmentally friendly technologies.
The developing countries are major importers of capital goods, which is essential to accelerate industrialization.In developing countries, economic development heavily depends on how integrated it is with the international market in terms of international trade (Ahmad et al. 2021a) [15].It is well established that economic growth is bound to increase energy consumption and adversely impact climate change.However, if growing energy needs are fulfilled with renewable energy, then the negative effects of economic growth on climate change can be decreased.In this regard, capital imports can play important role as they are complementary inputs and economies importing capital based on green energies are also experiencing the stable growth.The imports of green energy-based capital is enhancing the penetration of green energy consumption and solving the energy crisis issues [10].
China has pledged to increase its share of renewable energy to 50 percent of total power generation by 2030 [16].Other countries are increasing their efforts to increase the share of renewable energy owning to its positive impact on the economy.Various studies survey in detail the literature on the relationship between globalization, energy use, trade and GDP growth.The results show that in the long term, globalization, energy usage, trade, and GDP growth impact the ecological footprint.Similarly, the findings of short-run interactions also reveal that globalization, energy usage, trade, and GDP growth have positive linkages [17].
Technological advancement has played an important part in energy transition around the globe.The countries that adopted this change early on, have experienced rapid progress.The role of R&D on transition from traditional or nonrenewable sources to contemporary and renewable energy courses is becoming increasingly important.The governments play an important role in bringing out clean and green production-oriented energy policies with the leverage of R&D expenditure.The investment in R&D promotes renewable energy production and boost innovation in energy conservation, causing overall energy consumption to decrease [18].Thus, R&D investment tends to reduce the dependency on natural resources by adopting efficient technologies that help reduce emissions and environmental degradation [19,20].Evidence from Germany indicates that the electricity generated through innovation in photovoltaic and wind energy enhanced growth in energy sector [21].Another study from China showed that wind energy and solar PV technology in Chinese renewable energy industry enhanced energy growth and resulted in higher export growth [22].The transformation of energy generation structure, shifting from nonrenewable to renewable energy sources is majorly due to the development of R&D that replaced the use of limited resources with the sustainable sources [23].On the contrary, with enhanced economic growth and trade decreasing marginal returns to R&D and innovation may lead to increased energy consumption in the long run.For example, the increased accumulation of knowledge in existing technologies over time makes new research in new technologies challenging, resulting in declining returns to R&D [24].Hence, development of innovation and R&D tends to reduce non-renewable energy consumption more than renewable energy consumption [25].
Technological advancement supplemented with globalization results in research and development, technical knowledge and enhances a country's growth by transitioning to renewable energy consumption and reducing environmental deterioration [26][27][28].In high-income countries, globalization can speed up economic activities in various ways.For example, technological innovation gives rise to renewable energy sources that not only boost production but also reduce the per unit cost of production by solar and wind forms of renewable energy sources [29].This gives even more reasons to adopt renewable energy sources to avoid the adverse effects of fossil fuel base production that increases the cost of production as well as its prices [30,31].However, such advancements require effective policies to incentivize the deployment of renewable energy through effective governance [32].
Conventional globalization entails only foreign direct investment (FDI) and trade openness, but the contemporary notion encompasses a composite index of globalization i.e. economic, social and political aspects of globalization [33].All these globalization measures are expected to impact renewable energy consumption positively.In economic globalization, the FDI inflows in high-income countries occur along with the transfer of knowledge and capital, sound management practices, technology and innovative sources that enhance efficiency in the placement of renewable energy technologies [34].Similarly, trade liberalization may impact renewable energy consumption positively as it facilitates the economies with the availability of advanced technologies to shift from dirty to clean energy usage.However, the anti-globalization moves in terms of imposition of tariffs affect bilateral trade [35].
While the movement of goods across countries might increase energy consumption, the inflow of FDI may promote the conversion to green energy sources [36].The social aspect of globalization consists of the increase in trade of information due to culture proximity which may enlighten the countries and enhance the adoption of sustainable practices.The political aspect of globalization tends to reduce the consumption of nonrenewable energy through sanctions, regulatory frameworks and strict policies for environmental externalities [37].The more a country is enlisted in global climate treaties and agreements the higher the investments in renewable energy technologies and better living standards.
The recent changes in consumption and production of renewable energy point towards two major elements, i.e. oil and electricity that are largely used by capital goods for the energy sector and otherwise.Therefore, import of capital goods is very critical for development of energy sector as following the import of capital goods, energy input specific to that imported capital can be used [38].Therefore, imports of capital goods can potentially reduce imports for products like oil and coal.While oil products are required for existing machinery to run the existing production processes, the capital goods may produce more and cleaner energy, thus boosting the economy in a sustainable manner.Countries that import capital goods turn them into goods for power development in cleaner ways are better positioned to increase their competitiveness [39].
It is more important for developing countries to improve their technological efficiency and enhance their access to the latest green technologies through imports.Since trade liberalization and financial independence accompanied with international environmental rules incites the economies towards adoption of renewable energy sources [40], the margin for improvement is considerably higher in developing countries.Moreover, effective policy instruments such as tax advantage, grants and subsidies, education, skill enhancement, quotas and information on renewable energy consumption can also spur growth in renewable energy production and consumption [41].If the same investment could be directed towards investment and imports of capital that consume renewable energy, the import of capital goods can increase renewable energy production and consumption and replace the nonrenewable energy sources.Relative to developing countries, high income countries are better at adopting renewable energy technologies and affect consumption patterns simply because they have lesser constraints related to investments [42,43].Also, the tariffs are already very low in developed countries, however, developing countries need to lower tariff on capital goods specifically related to renewable energy production and consumption, this is expected increasecapital goods imports reducing the problem of asymmetric technological advancement in developing countries and further increasing the demand for renewable energy inputs and consumption [44].
Energy use and per capita GDP are highly correlated in the long run.This correlation has lent support to the claim of "resource economics" that energy is an essential input in the economy butit mainstream arguments can also explain that suggestthat energy use is the result of higher income.Controlling for capital intensity, GDP growth drives energy use in the long run [45].This also means that a rapidly growing economy may worsen the environmental conditions due to increased greenhouse gas emissions, but the increased income may also offset those effects by investment in technological innovation for renewable energy sources [46].Higher-income increases the demand for green products and forces producers to adopt clean energy sources, increasing renewable energy consumption.
This study contributes to the literature on the impact of international trade or globalization on renewable energy consumption and carbon emissions by focusing on import of capital goods instead of overall trade.As it is well established that there is short-run and long-run relationship between trade, renewable energy and carbon productivity [47,48].But the literature is silent on the role of capital imports on transition towards renewable energy.Capital imports leads to more economic output, but the production process requires various inputs including energy inputs.The energy requirement, whether renewable or primary depends on the type of capital imported.There is no classification available to differentiate capital or machinery imports according to their energy requirements, but in this study, we use the origin of imports as an indicator to differentiate capital imports.An attempt has been made to investigate the impact of globalization, research, and development (R&D), and import of capital goods from the USA, China and EU Countries on renewable energy consumption in the case of developing countries by estimating a fixed-effect model.

Research method
The present study used the panel fixed effects technique to analyze the impact of imports of capital good from China, EU and US along with economic, social and political globalization on renewable energy consumption by controlling R&D and GDP.The fixed effects model is well behaved in a way that it captures the cross-country differences [49].For this purpose, this study used the dummy variable for each country because each country has a different level of energy consumption [50,51].Thus, we can write equations for the Fixed Effects model as Where RE is renewable energy consumption, EG is economic globalization, SG is social globalization, PG is political globalization, ICHN is imports of capital goods from China, EU is imports of capital goods from European Union and IUS is imports of capital goods from US. GPC is GDP per capita, and R&D is research and development expenditures in the model.The independent variables, used in the analysis are reported in multiple studies and their channels are highlighted with renewable energy consumption such as Globalization [5,6] [52].
b i serve the purpose of capturing the crosscountry differences for all countries included in the sample, ln represents the variables are in log form.However, it may always be true that the crosscountry differences are captured through separate intercepts.For this case, we need to include an error term along with a common intercept.This approach is suggested by the proponents of the random effects model or the error correction model.It has the feature of identifying intercept separately for each country, that is, intercept is random with a fixed mean and a random component having mean zero and variance rÙ2.

Data and variable description
The present study uses the data of imports of capital goods from China, EU and US, which is taken from COMTRAD.Further economic, social, and political globalization is used to check the impact of globalization on renewable energy in developing countries (a list of countries and detailed descriptive is provided in Appendix A Tables A1-A4).The KOF globalization index, developed by [53], is utilized.The trade measures economic globalization flows with other countries, FDI, and portfolio investment, and restrictions on these inflows and outflows.The Social Globalization index is measured by personal contact, information flows, and cultural nearness.Political globalization is measured by the number of embassies in other countries, international organizations membership, UN Security Council missions' meeting membership, and the number of treaties signed with other countries.The data of GDP per capita and R&D expenditures are taken from WDI.The data of renewable and non-renewable energy is taken from American Energy Agency and this study use data spanning the period of 2000-2018.
Figure 1 shows that research and development expenditures have U shaped relationship with ratio of renewable to primary energy consumption.The U-shaped relationship indicates that only after a certain level of research and development expenditure they positively affect renewable to energy consumption relative to primary energy consumption.This is likely because renewable energy consumption requires at least certain minimum capacity of the country to implement efficient renewable energy solutions in their on local context.Therefore, the countries with higher research and development expenditures have that capacity to excel in renewable energy consumption relative to primary energy.However, this does not tell us how ratio of renewable to primary energy consumption change overtime if there is increase in research and development expenditures.
Figure 2 shows that relationship between capital imports and ratio of renewable to primary energy consumption.In general, higher capital imports leads to more economic activity and it is bound to increase energy consumption.However, the impact it has on the renewable energy relative to primary energy consumption is less explored.Above figure shows that Azerbaijan and Belarus are two outliers, if excluded, the relationship gets vague.This is probably because the type of capital imports determines its impact on composition of energy consumption.One of the factors that can be used to differentiate the type of capital imported is the origin country of capital imports.For instance, countries that spend more on renewable energy projects are likely to export capital that consumes more renewable energy relative to other energy types.
Table 1 gives the summary statistics of the data used to estimate fixed effects model.The sample countries are importing higher amount of capital on average from EU countries and relative low standard deviation.The average capital imports from China are second to EU with highest standard deviation.The average capital imports from US are small compared to China and EU.The Economic, Social and Political Globalization index ranges between 1 to 100 where higher value indicates greater globalization.Our sample countries average political globalization index is higher relative to economic and social globalization indicating they are more politically influential.

Results and discussion
Before moving to the estimation process, the panels are tested for cross-sectional independence.The null hypothesis of the cross-section independence test, Pesaran, 2003 points that the panel is cross-sectionally independent.Hence, it is evident by the result in Table 2 that panel is cross-sectional independent because we failed to reject the null hypothesis.The key reason for cross sectional independence is that the selected countries do not belong to a single economic block and they have different economic relationships with the three major economies i.e.China, EU and US.
As cross-sectional is independent, we applied the Levin Lin Chu unit root test with intercept and considered both intercept and trend.The results of unit roots are reported in Table 3.The unit root results indicate that all variables are stationary at level except R&D and GDP per capita.Further, this study applied the causality test to check either independent variables cause the dependent variables or not.The results of Granger Causality are provided in Table 4.It is reaved from the results that all independent variables have a relationship with the dependent variable (Renewable energy use).
Table 5 provides the coefficient and t-values of the regression coefficients that affect the ratio of renewable to non-renewable energy use in developing countries through capital goods imported from US, China, and EU Countries.A fixed-effect model for a group of 20 countries comprising 360 observations is regressed.We used the panel fixed model because the countries in the sample are not homogeneous.The fixed effect model is wellbehaved and captures the cross-country and heterogenous differences.We apply the Hausman test that confirms the Fixed effects model is more appropriate, as p-value is < 0.05.The null hypothesis of Hausman test is "Random effect is appropriate" [54] so rejecting the null hypothesis means that the fixed effect model is appropriate.
As developing countries have significant share of capital goods in total imports.There is a trade-off between economic growth and climate change, energy consumption plays a vital role to speed up the industrialization process which results in adverse effects of climate change (Ahmad et al. 2021a) [16].The regression results suggest that importing capital goods in developing countries from three different parts of the world significantly affects renewable energy.Capital goods imported from China to developing countries negatively and significantly affect renewable energy consumption.A 1% increase in capital import from China decreases the renewable energy ratio to nonrenewable energy use by 0.03%.While on the other hand, interestingly import of capital from EU countries increases share of renewable energy consumption, as an empirical result indicates that a 1% increase in the imports of capital goods causes a 0.06% increase in renewable energy consumption share.Further, it is found that the impact of imports from US is negative but insignificant on developing countries.These empirical findings are similar to [55] that developing countries should import more capital goods from the EU region.The positive impact of imports of capital goods from EU on renewable energy may be due to technology  Globalization has been linked directly or indirectly with human beings socially, economically, and politically.Globalization in all three contexts (Social, Political, and economic) is positively and significantly linked with renewable energy use [23,[25][26][27] investigated the impact of globalization along with technological development on renewable to nonrenewable energy consumption.Globalization accompanied with technological expansion results in the development of innovation and R&D which significantly increase the share of renewable energy consumption to non-renewable energy consumption.Regression results show that a 1% increase in economic, social, and political globalization causes respectively 0.303, 0.41, and 0.45 percent increase in the share of renewable energy use [56] and [57] in their respective studies established the same findings that in the process of globalization if the financial investments have been made in clean and green technologies, then the share of renewable energy consumption would increase.Further, financial investment in environmentally friendly energies positively impacts human development through reduced carbon emissions.
For the model with renewable to non-renewable energy ratio, a 1% increase in the GDP per capita decreases the renewable energy consumption by À0.09%.To accelerate the economic growth process, trade and industrialization are important, and in developing countries, the process of globalization facilitates trading activities which increase fossilfuel-based energy consumption and also intensify CO2 emission (Ahmad et al. 2021a).Moreover, most of the financial investments in developing countries boost economic activities at the cost of environmental degradation [58][59][60].
Regression results reveal that research and development expenditures have an insignificant impact on renewable energy consumption share, meaning that investment in research and development activities in both developing countries are not enough to enhance renewable energy share.

Conclusion
One of the Sustainable Development Goals (SDG) of the United Nations is to increase the use of Note: P-value are given in the parentheses and all variables are in log form.
renewable energy in energy consumption.Given the existing share of renewable energy in total energy consumption, developing countries confront a difficult task in achieving the targets related to renewable energy, and sustainable sources of energy and consumption under SDGs 2030.Finding solutions to increase renewable energy usage is critical.International trade is an unavoidable part of globalization, prompting us to consider the impact of imports on renewable energy usage.
The prime objective of this study is to explore the effects of imports of capital goods from China, EU and USA on renewable energy consumption in developing countries by using a panel data of 20 countries spanning the period of 2000-2018 by controlling R&D expenditures, globalization, and GDP per capita.A fixed-effect model found that importing capital goods in developing countries from three parts of the world affects renewable energy differently.Capital goods imported from China in developing countries have a negative impact on renewable energy consumption while imports from EU have a positive impact on Renewable energy consumption.However, in the case of US it is found negative but insignificant.Economic, social, and political globalization are positively and significantly linked with renewable energy use.GDP per capita decreases the renewable energy consumption.This study's finding significantly contributes to the vital importance of the trade policy in the context of renewable to non-renewable energy consumption in an economy.Capital imports from different parts of the world might become crucial for increasing renewable energy usage.The study also shows that, based on empirical analysis, industrialization and international trade should be regarded as complementary when creating developing countries' renewable energy policies.Our findings have few novel and practical policy implications.Firstly, renewable energy production and consumption in developing nations should be increased, as this is a viable alternative energy source that solves environmental externalities while not impeding economic advancement.This may be accomplished by stimulating renewable infrastructure investments and innovative product imports.Secondly, in developing countries government's support, encouragement, financial facilitations in the form of incentives, such as investment subsidies, tax breaks, and refunds for producing and importing renewable energy is very essential.
In this regard, the role of EXIMP (Export Import) Banks is important to facilitate the import of capital or machinery that is environmentally friendly.Moreover, the many countries are already implementing concessionary finance scheme to importers of capital or machinery to encourage investment.These concessionary finance schemes should provide additional concession for capital investment that is environment friendly.
Thirdly, officials and economists may take appropriate steps to raise knowledge about the negative implications of fossil fuel use and the advantages of renewable energy sources.Similarly, governments and decision-making bodies may create customer-friendly regulations for industries and businesses to make renewable energy more accessible to the market and public-private partnerships to stimulate renewable energy use.Finally, trade should be seen as a critical conduit for increasing renewable energy consumption through purchasing renewable energy technology.Policymakers can then enact restrictions to increase the scope of commerce necessary for advanced technology transfer in underdeveloped countries.
This study has established that source of capital imports matter in terms of affecting renewable energy consumption in developing countries.However, future research should be on finding the specific reasons for this phenomenon, whether this is due to technology embedded in capital goods imports from advanced countries that takes renewable energy as input, or its durability and efficiency.Also, more recent events such as Russian-Ukraine conflict can be analyzed in the context on high energy costs and supply chain issues affecting renewable energy consumption.

Figure 1 .
Figure 1.Research and development expenditures and ratio of renewable to primary energy consumption.

Figure 2 .
Figure 2. Capital imports and ratio of renewable to primary energy consumption.

Table 5 .
Results of fixed effects regression.

Table A2 .
Social globalization and political globalization.

Table A3 .
GDP Per capita and Capital Imports from EU.

Table A4 .
Capital imports from China and US.