Business confidence in the shift to renewable energy: A country-specific assessment in major Asian economies

Abstract

The growing awareness of the importance of transitioning to sustainable energy sources emphasizes the necessity of fostering business optimism toward renewable energy, as businesses wield significant influence in driving innovation and scaling up renewable energy deployment. Therefore, this study investigates the impact of business confidence on long-term renewable energy generation in selected major Asian economies: China, Japan, South Korea, Indonesia, and Turkey. Through country-specific assessments, we utilized three methods capable of yielding long-term empirical results: Fully-Modified OLS (FMOLS), Dynamic OLS (DOLS), and Canonical Cointegrating Regressions (CCR). The study also conducted a robustness check by utilizing the Robust Least Squares (RLS) method, preceded by multiple preliminary tests, to ensure the validity and reliability of the results. The findings show that businesses in all selected countries exhibit confidence toward long-term renewable energy. However, there are variations in the confidence level, with businesses in Japan, South Korea, and Turkey demonstrating high confidence while those in China and Indonesia show low confidence. The study also found a trade-off between business confidence levels and energy consumption. In Japan, South Korea, and Turkey, high business confidence correlates with a negative impact of energy consumption, while in Indonesia, low business confidence is aligned with a positive effect of energy consumption on renewable energy. This suggests that business confidence and energy consumption dynamics influence renewable energy development. Policy recommendations tailored to each of the selected countries are provided to address these findings, aiming to enhance business trust and optimism in renewable energy within major Asian economies.