Renewable Energy Adoption Across Business Cycles

This paper analyzes the short- to medium-term dynamics of renewable energy adoption across 178 economies from 1985 to 2022, using the local projection method to assess the impact of economic fluctuations. The results highlight the countercyclical nature of renewable adoption, with recessions driving a shift towards renewables, while economic expansions initially slow this transition. Emerging economies with significant foreign investment exhibited the strongest shift towards renewables during recessions, while advanced economies showed more variable responses. Larger, diversified economies adopted renewables more readily than smaller, import-dependent ones, and energy-exporting countries increased renewable use during downturns but reversed the trend during booms. Policy stringency played a key role, as stricter regulations promoted lasting renewable adoption following recessions, though during expansions, only conventional policies—not market-based regulations—sustained the shift. These findings offer critical insights into how economic cycles and policy frameworks influence global energy transitions.