How does the shift towards services affect renewable energy deployment? Evidence from OECD countries

Abstract

For several decades, OECD countries have been experiencing a shift towards services, on the one hand, and, on the other hand, they are still emitting large amounts of greenhouse gas emissions. To tackle greenhouse gas emissions, policymakers often design appropriate strategies to promote investment and innovation in renewable energy sources. However, some important drivers of renewable energy (especially environmental regulations and environmental innovation) are much less common in the services sector than in other sectors (especially manufacturing). Based on this fact, this article aims to examine how services affect renewable energy deployment in OECD countries. Our analysis of the implementation of both environmental regulations and environmental innovation in services suggests that the shift towards services may dampen renewable energy deployment. Additionally, we employ the generalized quantile regression (GQR) estimator on panel data from OECD countries over the period 1991–2018 to investigate the relationship between the shift towards services and renewable energy consumption. The results reveal that the shift towards services tends to negatively affect renewable energy deployment in OECD countries. More precisely, the findings show that the share of services in the economy has a negative and significant impact on renewable energy consumption per capita in OECD countries. On the basis of these findings, policy implications are drawn.