The effect of financial stress on renewable energy consumption: evidence from US data

The planet earth is facing an unprecedented level of environmental crisis fuelled primarily by the exorbitant level of carbon stock in the atmosphere. Hence, our sustainable living in this planet depends greatly on mitigating anthropogenic greenhouse gas emission. This calls for a paradigm shift of energy epicentre from traditional fossil fuels to renewable energy. The transition, however, is not smooth because numerous obstacles deter large-scale penetration of renewable energy. This study aims to examine the impact of financial stress on renewable energy consumption in the USA. We avail nonparametric and quantile econometric techniques on monthly data between 1986 and 2016. Results show a negative effect of financial stress on renewable energy consumption in the long run. Analysis further shows that financial stress unidirectionally Granger causes renewable energy in the long run—with greater prominence in the upper half of the distribution. However, consumers tend to substitute fossil fuel with renewable energy during the time of higher financial stress, perhaps as an attempt to seek relief from augmented financial strain. This implies that the benefits of adopting renewables are considerable notwithstanding the (energy generation) project scale and adoption rate in the economy.