Renewable and Sustainable Energy Reviews 74 (2017) 110–115

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Renewable and Sustainable Energy Reviews

journal homepage: www.elsevier.com/locate/rser

The impact of sources of energy production on globalization: Evidence from MARK

panel data analysis
⁎
Syed Mahbubur Rahmana,b, , Mohammad Dulal Miahc
a
PROGGA: Knowledge for Progress, Mirpur 11, Dhaka, Bangladesh
b
Faculty of Business Administration, American International University-Bangladesh (AIUB), Banani, Dhaka, Bangladesh
c
Department of Economics and Finance, University of Nizwa, Nizwa, Oman

A R T I C L E I N F O A BS T RAC T

Keywords: Greenhouse gas (GHG) emission is one of the major reasons for global warming and climate change. Among
Energy production various sources responsible for GHG emission, energy generation is found to be the leading one. Increased
Emission economic activities facilitated by the ever-expanding level of globalization lead to substantial accumulation of
Globalization GHG in the atmosphere. Hence, the relationship between economic growth and environmental degradation
Fossil fuel
remains a primary concern to policymakers as well as concerned stakeholders. This study aims at investigating
Renewable energy
the relationship between the sources of energy production – fossil sources and renewables, and the level of
Annex I Parties
globalization. A panel data consisting of 26 countries from the list of Annex I Parties to the United Nations
Framework Convention on Climate Change (UNFCCC) for 21 years has been analyzed. The study finds that an
increase in the electricity production from fossil based sources, i.e. oil and coal, reduces the level of
globalization. It also supports the argument that coal is more detrimental to the environment. Moreover, this
study finds a significant negative influence of the use of renewables for energy production on the level of
globalization. This finding supports the premise that renewable energy is used domestically and works as import
substitute for energy demand leading to a negative effect on globalization. Further study in developing countries
with larger sample may help compare and contrast the effect of sources of energy on globalization.

1. Introduction
The year 2016 experienced the highest annual global average land
and ocean surface temperature since 1880 with an anomaly of 0.94 °C
above the 20th century average [23]. Annual record of average
temperature has been broken in three years since 2014 in a row by
the largest margin ever. The year 2008 was the coldest year of the 21st
century, and the period 2001–2010 was 0.217 °C warmer than that of
the preceding decade [18,22]. More specifically, “each of the last three
decades has been successively warmer at the earth's surface than any
preceding decades since 1985” [15]. The Fourth Assessment Report
(AR4), prepared by the Intergovernmental Panel on Climate Change
(IPCC), affirms that the global sea level has risen on an average at the
rate of 1.8 mm per year over the period of 1961–2003 and at the rate of
3.1 mm per year over the period of 1993–2003 [14]. Recently
published, the Fifth Assessment Report (AR5) indicates that over the
period of 1901–2010, global mean sea level has risen by 0.19 mm per
year ranging from 0.17 to 0.21 mm [15]. However, these changes are
nothing new because the humanity has experienced several extensively
long-term climatic changes in the past; for instance, the most recent ice
age lasted up until 10,000 years ago. AR5 also informs that greenhouse
gas (GHG) emissions – the major reason for anthropogenic climate
change – between 2000 and 2010 increased by 10 Giga ton Carbon di
Oxide (CO2) equivalent (CO2e) [16]. While important for sustenance in
the earth, CO2 is affecting global warming and climate change.
Future GHG emissions are the product of very complex dynamic
systems, determined by driving forces such as demographic develop-
ment, socio-economic development, and technological change [13].
These driving forces are greatly the results of production and con-
sumption attitude of individuals and nations whilst affect the volume of
emissions. Production and consumption are also the indicators of
national income and growth. The Environmental Kuznets Curve
explains the environmental degradation and income, where it under-
pins that at the initial stage of growth pollution increases and after a
certain level the trend reverses. Boutabba [4] also argues that financial
development causes environmental pollution. Hence, decoupling
growth and environmental pressure has been a priority to the global
leaders; for instance, the Organization for Economic Cooperation and
Development (OECD) adopted this principle as the main objective of
the OECD Environmental Strategy [24]. Research has found that

⁎
Correspondence to: PROGGA: Knowledge for Progress, House 6 (3rd Floor, East Side) Main Road 3, Block A, Section 11 Mirpur, Dhaka 1216, Bangladesh.
E-mail addresses: rahman_s_m@yahoo.com (S.M. Rahman), dulal@unizwa.edu.om (M.D. Miah).

http://dx.doi.org/10.1016/j.rser.2017.02.037
Received 22 November 2015; Received in revised form 28 January 2017; Accepted 6 February 2017
Available online 20 February 2017
1364-0321/ © 2017 Elsevier Ltd. All rights reserved.
S.M. Rahman, M.D. Miah
growth of an economy is promoted by globalization [7]. In contrast,
some researchers have argued that globalization is threatening and
irresistible with the potential to eliminate local differences [26].
Whatever the controversy in defining and analyzing globalization,
people from different wings of the society including academia and
practitioners acknowledge that the world is more globalized and the
behavior of the different sectors of the society displays accordingly
[21].
The competitive advantage that an economy can achieve from being
global is much pronounced among other reasons boosting globaliza-
tion. Natural environment is affected by any dimension of globalization
irrespective of its focus to the economic integration, political interac-
tion, flow of information and cultural assimilation [27]. In academia
and research, globalization has received considerable attention in the
recent years. Globalization has been tested as dependent and also as
independent variable with relation to a wide range of topics. Studies
have concentrated on the association of globalization with, for instance,
energy demand [29], environment [27], emission [12,17], growth and
economic development [10,2,6], tourism [8], infant mortality [31] as
well as obesity [9]. Panyotou [27] discussed globalization with trade-
related environmental effect, relation of environment to capital flow
and foreign investment as well as technology. Shahbaz et al., [28] found
that economic growth in the long run is inversely related to CO2
emissions as well as energy consumption; and financial development is
positively related to CO2 emission [20] and thus contribute to
environmental degradation. Study also found a positive relationship
between per capita real income growth rate and carbon emissions;
however, Shahbaz et al., [28] found neutral relationship between
globalization and CO2 emissions. Lee and Min [19] also showed how
carbon emission is affected by globalization. Chen and Hsu [5] showed
that oil price volatility reduces trade significantly for net oil-importing
countries while for net oil exporters the impacts are not statistically
significant. The volume of trade ultimately affects globalization. Al-
mulali [1] investigated the relationship among emissions, trade and
energy consumption. Al-mulali and Binti Che Sab (2012) examined the
relationship between emissions and development. It is evident that
emissions already attracted substantial number of researchers globally
with specific focus on different regions. However, Overland [25] argued
that although globalization covers many sub-topics, energy is a missing
link. Overland [25] also showed that energy has not been taken into
consideration in the six major composite indices of globalization
including the Konjunkturforschungsstelle (KOF) Index which has been
used in this research.
Different initiatives and approaches have been undertaken and
implemented in both developed and developing countries to reduce
carbon emission. For developing countries, Nationally Appropriate
Mitigation Actions (NAMA) refers to the actions under the supervision
of the national government that reduce GHG emission. On the other
hand, developed countries have agreed on nationally appropriate
mitigation commitments or actions on quantified economy-wide emis-
sion targets for 2020. Apart from NAMA, clean development mechan-
ism, Reducing Emissions from Deforestation and Forest Degradation
(REDD) and REDD+, emissions from international aviation and
maritime transport are other initiatives for reducing emissions.
Although both emission and globalization separately appealed the
researchers globally with a varied set of investigations, study focusing
the impact of emission on globalization is hardly found. The level of
emissions varies extensively with the sources of energy production. CO2
emission from the use of fossil fuel constitutes 57% of the total global
GHG; and energy supply, while emitting more than one fourth of the
total, is the highest contributor to the accumulation of GHG [14].
Considering these substantial impacts of fossil fuel and energy
generation on emissions, this study aims at finding the relation, if
there is any, between the sources of energy production, i.e. fossil
sources and renewables, and the level of globalization. This study
investigates how the varied emissions from fossil-based energy gen-
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Renewable and Sustainable Energy Reviews 74 (2017) 110–115
eration and also from renewable sources affect the level of globalization
of countries. Since the volume of oil export and import for energy
generation fluctuates significantly among nations, it is likely that
diverse sources of energy differently affect trade and consumption
and thus globalization. Hence, the research focuses on how the level of
globalization is affected by the use of fossil and renewable sources a
country consumes for energy production.
This study contributes to the existing literature in two important
ways. First, the research relates two seemingly unrelated issues –
globalization and the sources of energy. Although globalization has
many contributions to other variables and vice versa, link of globaliza-
tion to fossil and renewable energy sources is likely to add a new
dimension. Second, the quantitative approach for linking globalization
to energy sources is likely to assist policymaker's emphasis on energy
sources as an additional dimension towards trade policy.
The next section discusses the data and methods followed by
findings and discussions in Section 3. Section 4 concludes the paper.
2. Data and methodology
2.1. Data description
This research considers Annex I countries to the United Nations
Framework Convention on Climate Change (UNFCCC). The rationale
behind, these countries are excessively involved with production and
usage of renewable energy; hold superior position in the ranking of
globalization compared to the developing part of the world (i.e. all of
the sample countries are among the top 50 globalized nations in the
world); and maintain a standard and accessible database, which is
essential for the intended research. Moreover, the selected countries
represent the OECD group to a larger extent (only three of the 26
selected countries are non-OECD countries) and share almost 59% of
the world's gross domestic product (GDP) (in 2016 price). This implies
that the sample countries can render a general conclusion about the
topic of interest of this research. However, data for all Annex I
countries are not available especially at the threshold periods. As such,
some countries for which data for a substantial period is missing (or
because of the presence of extreme values that are considered outliers)
have been excluded from the study. Finally, 21-year data ranging from
1990 to 2010 have been gathered for 26 countries out of 43 Annex I
Parties (Table 1).
To test the causal relationship between variables, this study
considers the overall level of countries’ globalization as dependent
variable. Of course, globalization can be driven by various factors.
However, the theme of the current research is to check the impact of
sources of energy on globalization. As such, this research selects few
independent variables, which are assumed to represent different
sources of energy. Sources of energy are primarily bifurcated as
renewable and non-renewable. Non-renewable sources of energy are
the fossil fuels comprised of coal, petroleum and natural gas. Electricity
produced from coal and electricity produced from oil are treated
separately as proxies for fossil-based sources of energy. An alternative
to fossil-based fuel is renewable sources of energy. Renewable energy is
generally defined as energy that is collected from resources, which are
Table 1
List of countries included.
Australia France Latvia Russian Federation
Austria Germany Netherlands Spain
Belgium Greece Norway Sweden
Bulgaria Hungary Poland Turkey
Canada Ireland Portugal UK
Denmark Italy Romania USA
Finland Japan
S.M. Rahman, M.D. Miah Renewable and Sustainable Energy Reviews 74 (2017) 110–115

naturally replenished, on a human timescale, such as sunlight, wind, β=coefficients of X variables.

rain, tides, waves, and geothermal heat. Most of the databases report
renewable energy as a cluster instead of segregating them into sources.
Thus, the use of renewable energy is considered an independent
variable.
There are other elements, which can also affect the level of
globalization. Thus, it is imperative to include some control variables
that are seemingly linked to globalization. The obvious candidates for
this purpose include a country's level of economic development and the
flow of trade. Economic development can be linked to globalization in
the sense that a developed country is more engaged with external trade
and business than that of a developing or underdeveloped country. This
external trade relation reflects in a country's import and export
activities. The degree of economic development, import and export
influence factors of globalization and can be included as control
variables. Export from a country results in the import for another.
Since trade dependence between and among the advanced nations is
extremely high, accounting both variables in a single equation may
overlap and become redundant. As a result, this study includes the level
of country's economic development measured by GDP per capita (at
current price), and the ratio of export of goods and services to GDP as
control variables.
This yields a total of five independent variables. The panel data was
unbalanced because data for some countries are not available for some
specific years. The final list consists of 519 observations in total. Data
on the level of overall globalization are collected from the KOF Index of
Globalization, prepared by the Swiss Federal Institute of Technology
(ETH), Zurich and the remaining from the World Bank database.
Expected sign of the relationship between fossil fuels and globaliza-
tion can be predicted. For instance, globalization index includes,
among others, the flow of various products and services among
countries. Since developed countries are more regulated addressing
the issues related to climate change and environment, the flow of goods
produced from low carbon emitting technologies is expected to be high.
In contrast, it is also expected that various restrictions may be imposed
for products produced from fossil fuels because these products have
higher negative environmental impact. In this sense, the relationship
between renewable energy and globalization is expected to be positive.
However, this simplistic prediction may not be true in the case where
the products or services (including energy itself) produced from
renewable sources are internally used (assuming that internal demand
for these sorts of goods and services are more than the available
supply) owing to country's concern about public health and environ-
ment. If so, a lesser flow of these goods and services among and
between the countries is expected. Thus, an inverse relation between
energy produced from renewable sources and globalization is expected.
This implies that the impact of the use of renewable source for energy
production cannot be predicted a priori (i.e. it depends on the
threshold level of particular country's demand). As mentioned already,
a country's level of economic development is expected to be positively
linked to globalization. Similarly, the association between export and
globalization is expected to be positive.
X=independent variables.
μ=white noise.
Calibrating the model into the data yields-
globit = α1 + β1epos + β2epcs + β3renew + β4gdp + β5expo + εit
where subscripts i and t denote country and year, respectively, globit is
the overall globalization index for country i at period t, α1 is the fixed
effects intercept of the model and εit is the error term which is believed
to be independent and identically distributed with ε ~ N(0, σ2). Among
the independent variables, epos indicates electricity produced from oil
sources, epcs represents the electricity produced from coal sources and
renew is the use of renewable energy whereas gdp accounts for per
capita GDP at current prices and finally expo indicates the export as
percentage of GDP.
3. Results and discussion
In practice, panel data models are estimated using pooled OLS,
fixed effect or random effect techniques. To check whether fixed or
random effect would be suitable for the data, Hausman test is
conducted. The Hausman test is designed to detect violation of the
random effects modeling assumption that the explanatory variables are
orthogonal to the unit effects. If there is no correlation between the
independent variable(s) and the unit effects, then estimates of β in the
fixed effects model ( β̂FE ) should be similar to the estimates of β in the
random effects model ( β̂RE ). The Hausman test statistic H is a measure
of the difference between the two estimates:
H = (βˆRE − βˆFE )′[Var (βˆFE ) − Var (βˆRE )]−1(βˆRE − βˆFE )
Under the null hypothesis of orthogonality, H is distributed chi-
square with the degrees of freedom equal to the number of regressors
in the model. A finding that p < 0.05 is taken as evidence that, at
conventional levels of significance, the two models are different enough
to reject the null hypothesis, and hence to reject the random effects
model in favor of the fixed effects model. The result of Husman test for
the data is presented in Table 2 –.
The result shows the rejection of the null hypothesis that there is no
difference between fixed and random effects in favor of an alternative
hypothesis that the fixed effect model better fits to data than the
random effect model at one percent level of significance. This implies
that the model is not misspecified. Moreover, the coefficient estimates
from both the random and fixed effects estimators also provide
additional support. The associated p-values show the rejection of the
hypothesis that ‘there is no difference in variances’ for all the
independent variables except epcs which fits to both models. Thus,
the least square dummy variable (LSDV) model for the given data is
tested. The result of the test is shown in Table 3 –.
Table 3 presents the result of the pooled LSDV regression. The R-
Table 2
Test cross-section random effects.

2.2. Model specification Test Summary Chi-Sq. Statistic Chi-Sq. d.f. Prob.

Cross-section random 19.488347 5 0.0016

The unbalanced panel has been analyzed using panel least squares
method to detect the effect of independent variables that are presumed Cross-section random effects test comparisons:
to be related to globalization. In this research, the following model is
applied to analyze the relationship - Variable Fixed Random Var (Diff.) Prob.

EPCS −0.089267 −0.054203 0.000479 0.1091

Yit = αit + ∑ βit Xit + μit
EPOS −0.469529 −0.434268 0.000140 0.0029
RENEW −0.130699 −0.052683 0.001445 0.0401
Where. GDP 0.000062 0.000090 0.000000 0.0007
Yit=dependent variables of the country i (i=1, 2 …N) at year t (t=1, 2 EXPO 0.383174 0.358325 0.000160 0.0493
…T).
α= intercept of the equation.

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S.M. Rahman, M.D. Miah Renewable and Sustainable Energy Reviews 74 (2017) 110–115

Table 3 level of emission in the producing country. This in turn, reduces the
Dependent Variable: GLOB. trade flow among and between countries. The coefficient of GDP seems
Total panel (unbalanced) observations: 519.
to be very small even though it is statistically significant. An increase in
Coefficient Std. error t-Statistic Prob. GDP per capita by 16,667 will lead to an increase in globalization by
one point. This result can be explained by the fact that the sample
constant 71.01802 2.969829 23.91317 0.0000 countries are already in saturation on the relation between economic
epcs −0.089267 0.044668 −1.998459 0.0462
development and globalization. Or in other words, globalization in
epos −0.469529 0.049818 −9.424946 0.0000
renew −0.130699 0.059985 −2.178871 0.0298 these countries depends more on environmental factors than on
gdp 0.000061 0.002910 2.126793 0.0339 economic development. Since export is an obvious determinant of
expo 0.383174 0.035355 10.83782 0.0000 globalization, a strong and positive relationship between them is
expected. The regression result also supports this proposition. An
Effects Specification
increase in export to GDP by one percent leads to an increase in
Cross-section fixed (dummy variables) globalization by 38 points.
R-squared 0.845907 Mean dependent var 76.93474 A drawback of the model rests on the result of Durbin-Watson test.
Adjusted R-squared 0.836768 S.D. dependent var 11.90486 The Durbin-Watson value is little weak (0.24). A quite low value (0) or
S.E. of regression 4.809796 Akaike info criterion 6.035252
extremely high value (4) of Durbin–Watson statistic suggests that
Sum squared resid 11312.59 Schwarz criterion 6.281027
Log likelihood −1536.148 Hannan-Quinn criter. 6.131539 perhaps there exists multicollinearity in the data. This implies that two
F-statistic 92.56564 Durbin-Watson stat 0.239439 or more predictor variables in a multiple regression model are highly
Prob(F-statistic) 0.000000 correlated, meaning that one can be linearly predicted from the others
with a substantial degree of accuracy. In regards to multicollinearity,
[3] argues-
When students run their first ordinary least squares (OLS)
regression, the first problem that they usually encounter is that
square value is 0.85, which implies that 85% of the variation of of multicollinearity. Many of them conclude that there is some-
globalization can be explained by these five variables. Estimated F thing wrong with OLS; some resort to new and often creative
value is 92.56. The probability of F is zero. Thus, the null hypothesis is techniques to get around the problem. But, we tell them, this is
rejected and the variation of globalization is not due to random wrong. Multicollinearity is God's will, not a problem with OLS or
chances, rather it can be explained by the model. Taking values from statistical techniques in general.
Table 3, the following equation is formed -
Having said this, the correlation between the exogenous variables is
glob=71.02–0.4695epos –0.0892epcs–0.1307renew + 0.00006gdp + 0.3831expo checked (reported in Table 4). The results show that there exists a
significant correlation (r=−0.52) between energy produced from coal
The signs of the co-efficient of determinants are same as expected source and renewable sources. As expected, the relationship between
and indicated in the data description section. The sign of renewable them is negative. The association between other explanatory variables
energy turns to be negative. Moreover, coefficients of determinants for is not substantial. In another trial, after dropping renewable energy
two (epos and expo) of the five independent variables are significant at from the analysis the model does not show a noteworthy change [R-
one percent level whereas the coefficients of determinant for renewable square, 0.8441, Durbin-Watson, 0.2475]. Thus, it is statistically logical
energy (renew) and country's level of economic development (gdp) are to apply the model.
significant at five percent level., Also, the coefficient of epcs is The ultimate objective of the creation of UNFCCC, IPCC and the
significant at five percent level. The model indicates that electricity subsequent protocols is to stabilize the GHGs by shifting the anthro-
production from oil resources and electricity production from coal pogenic activities including behavioral, cultural and social changes for
resources negatively affect globalization. For instance, an increase in a better climate for next generations on the earth. All parties to the
electricity production from coal by one percentage in Annex I countries Convention are required, according to Article 4.1(b), to undertake
decreases the globalization index by nine points. Similarly, an increase efforts to mitigate climate change [30]. Annex I countries are mostly
in electricity production from oil by one percent of total electricity from the developed part of the earth and are more capable compared to
production in Annex I countries decreases the globalization index by 47 the developing part in investing in technologies to ensure mitigation of
points. This provides with the evidence that coal as a source of energy GHG. Globalization index for these countries shows an increasing trend
production affects globalization less than what oil does. This can be indicating that these countries are becoming more globalized while
explained by the fact that coal still occupies a central stage of energy simultaneously investing in carbon mitigation projects. In many cases
production in countries polluting the environment most (for instance, the index of globalization has doubled during the last two-three
USA, the second most emitters of CO2 after China, produces almost decades. The rate of energy access in the selected countries is also
half of its electricity from coal). Countries, which have not been able to high. It is revealed from the study that if the countries emit more
invent renewable sources for energy production yet, rely on bio-fuels GHGs, it is likely that their globalization index will come down.
even if it reduces their level of globalization. On the other hand, This outcome may have few implications. First, if higher emission
contribution of gas to energy production is very miniscule (i.e. the
average for all the sample countries over the period is 6.55% only).
Thus, countries are ready to sacrifice this (i.e. oil) source of energy in Table 4
the question of environment which negatively affects globalization. Correlation Matrix (list-wise missing value deletion).
This argument provides support to the unexpected level of sensitivity of
EPCS EPOS RENEW GDP EXPO
oil as source of energy to globalization. The result further proves that
while developed countries are concerned about globalization, they are EPCS 1.000000
less compromising in the question of using coal as a source of energy. EPOS −0.053865 1.000000
RENEW −0.522275 −0.120440 1.000000
The analysis further shows that an increase in the use of renewable
GDP −0.297842 −0.218729 0.297779 1.000000
energy by one percent leads to a decrease in globalization by 13 points EXPO −0.260721 −0.161276 −0.007982 0.196621 1.000000
in the sample countries. This finding implies that products and services
produced using renewable sources are used internally to reduce the

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S.M. Rahman, M.D. Miah
by burning oil and coal for energy generation continues and conse-
quently, countries become less globalized, it would have an adverse
consequence on their businesses, flow and share of information as well
as political and social integration. For instance, while people are
becoming more concerned about eco-friendly production and con-
sumption, higher emissions from fossil burning may create negative
image and thereby reduce the volume of business globally. National
competitiveness may decrease as well. A country has to examine the
volume of business and potential impact by the level of globalization
before planning new facilities to produce energy from fossil-based
fuels.
Second, if the globalization index goes down for a particular
country, it might lead to reduced capital inflow, technology and human
resource. It again implies that the higher the volume of energy
generated from fossil fuels the lower is the access to capital, technology
and human resource.
Third, this study finds a negative and statistically significant impact
of renewable energy on globalization. Alternatively, a country which
depends more on renewable resources as a source of energy is less
globalized. This is not surprising, although it seems to be. It can be
safely said that no country is self-sufficient in the long run in producing
energy from the renewable sources and hence cannot fulfill its own
demand for clean energy. Thus, it is less likely for such a country to
venture for export. On the other hand, internal production of energy
from renewable resources can actually complement previously im-
ported goods or services. The combined effect may results in less
involvement in international trade. This actually provides an opportu-
nity for advanced nation to increase the flow of goods and services
among and between countries. Needless to say, clean technology is in
high demand due to environmental awareness of countries across the
world. Moreover, advanced nations would be able to export energy
produced from clean raw materials once they reach a threshold level to
fulfill their own demand. A higher share of clean energy is expected to
have a contributing effect on globalization.
4. Conclusion, recommendation and policy implication
Development-based climate studies are limited so far [11]. In view
of this limitation, this paper aimed at finding the relation between the
impact of sources of energy production and globalization. The study
applied the panel least square technique. The regression results showed
that emissions from burning oil and coal to produce electricity had
negative impacts on globalization. And, higher level of emission
reduced the country's level of globalization. Another particular finding
of the study was that the elasticity of coal as a constraint to globaliza-
tion was less pronounced than the elasticity of oil. This implies that
some economies were ready to forgo oil as a source of energy for the
greater interest of international trades because oil contributed only a
tiny percentage to their total energy production. In contrast, the sample
countries were found to be less compromising in using coal as a source
of energy, which proved that coal still occupied a larger space among
the sources of energy production even in advanced economies. The
research further found a negative association between renewable
energy and globalization, which implied that the sample countries
were not been able to materialize the benefits of international trade as
far as the clean technology is concerned. This finding, though see-
mingly a paradox, is not unexpected given the fact that use of clean
technology is concentrated only on very few highly developed coun-
tries. Moreover, the use of renewable energy is limited so far. Although
the urge for utilization of renewable resources is immense, only few
countries (Austria, Canada, and Norway, for example) have shown
mentionable progress in producing energy from renewable sources.
Energy produced from renewable resources is still not internationally
price-competitive compared to that from bio-fuels due to lack of
economies of scale. It is unlikely that given the current level of
technological progress, countries will be heavily involved in trading
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Renewable and Sustainable Energy Reviews 74 (2017) 110–115
energy produced from renewable resources. Besides, locally produced
clean energy complements import of fossil-based fuels and hence,
creates a negative pressure on the level of globalization.
The above findings offer some policy implications. Concrete policy
prescriptions, in this regard, require identification of the intervening
factors (mediators) through which energy production from fossil-based
fuel negatively impacts globalization. Two primary intervening factors
are: the environmental regulations and the consumers’ awareness.
Many environmental regulations as well as bilateral agreements have
come into being to restrict import and export of goods and services
produced violating certain environmental code (emission cap, for
instance). Some countries have already set the timeline to completely
ban energy production from coal (Finland by 2030 and the US state of
Oregon by 2035, for instance). Moreover, countries, which are very
concerned about their local and partner countries environmental
degradation, have put multiple restrictions on goods and services
produced using non-renewable energy in an attempt to encourage
their trade partners to phase out coal-based energy production.
Second, consumers of advanced economies show negative interest on
products produced without complying the green policy. Fossil-based
fuel seriously violates green policy. The combined effect is the
dampening of demand for these products. Thus, countries should
reduce their consumption of fossil-based fuels in order to tap the
benefits resulting from the increased movements of goods and services.
A clean-energy policy would accompany other direct and ancillary
benefits. For example, cutting consumption off the fossil fuel would
help countries to reduce their national level of GHG emission. Besides,
less reliance on non-renewable energy would drive a country's focus
towards clean or renewable sources of energy. This would strengthen
the innovative capacity not only in the field of clean-energy technology
but also in other related industries. If the country can produce energy
(also the associated technology) from renewable sources more than its
own demand, the excess capacity can be exported. This would increase
the level of globalization. Initially, it might seem costly to produce
energy using clean and renewable technology because environmental
practices impose an instant cost to the producers and thereby, hamper
their cost-competiveness in the international market. However, in the
long-run this may be beneficial if the impact of globalization is taken
into account. The potential benefits from globalization through using
clean technology may outweigh the loss incurred by switching from
fossil-based fuel to clean-energy production.
Several countries are tending towards gradual phasing out of coal as
a source of energy. In this pursuit, numerous laws and regulations are
enacted which frequently face tremendous resistance from the incum-
bent beneficiaries involved with the industry. The finding of this
research can provide policymakers with the evidence that could
support their stance. Hence, policymakers can showcase this evidence
to pursue those who will lose from clean energy policy that complying
with the regulations appears to be costly but such an effort will help
ultimately shaping a country's as well as firms’ innovation capacity.
The finding also has an important implication for emission trading
market. Emission trading is a mechanism in which a country that emits
more than the allowable level (cap) of GHG has to buy the emission
right from those countries that emit GHG less than the allowable quota.
Currently, emission trading is largely limited to EU countries because
the nature of the market is very sophisticated and also the transaction
cost is prohibitively high. By reducing the reliance on fossil fuel,
countries may restrict emission to the allowable limit and avoid costly
market transactions.
The finding of this study is not in position yet to be generalized for
developing countries. For instance, China and India are among the
highest emitters, but at the same time their GDP is increasing
substantially and becoming more globalized. Further study on larger
and developing economies may be useful to compare and contrast the
level of globalization affected by emissions from different sources of
energy.
S.M. Rahman, M.D. Miah
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