Unlocking the Path to Sustainable Energy: An Analysis of Factors Influencing Renewable Energy Consumption in Malaysia

The paper seeks to determine whether renewable energy is a future pathway for society or rather a temporary stage leading towards sustainable sources of energy. It evaluates the factors that affect the use of renewable energy in Malaysia through modeling their long-term relationship and short-term causalities. Time series data collected from 1970 to 2020 is used in the Johansen cointegration test and Vector Error Correction Model (VECM) to determine the association among renewable energy consumption, per capita GDP, foreign direct investments (FDI), carbon dioxide (CO2) emissions, oil prices, trade openness, and urbanization. There is evidence of a strong positive long-term association between renewable energy consumption and per capita GDP. However, there is evidence of a negative long-term relationship between renewable energy and FDI, CO2 emissions, oil prices, and urbanization. There is a positive relationship between renewable energy consumption and trade openness in the long term. In addition, short-term causality analysis shows the existence of a feedback loop between renewable energy consumption, economic growth, and FDI. Overall, the paper provides empirical evidence for the carbon-neutral target set by Malaysia in 2050.