Towards A Political Economy of Renewable Energy: Does Democracy and Globalization Matter for Central and Eastern European Countries (CEECs)

Renewable energy policy is one of the remarkable parts of the sustainable development path. However, the polit-ical-economic dimension of renewable energy policies is not so much widely discussed. Besides, democracy and globalization are essential factors affecting renewable energy. Hence, this paper examines the relationship between renewable energy consumption, democracy, and globalization in the Central and Eastern European Countries (CEECs) during the period 1995-2021. Economic growth and CO 2 emissions are used as control variables in the model. The study employs the panel vector autoregressive (PVAR) estimation technique to quantify the relationship between renewable energy consumption, democracy


Introduction
Over the past fifty years, global climate change has been sparked by increased CO2 emissions (Seetanah et al., 2018). Thanks to carbon dioxide and other greenhouse gases as a primary driver of climate change, the global average temperatures have increased by more than 1℃ since pre-industrial times (Ritchie et al., 2020). Therefore, energy transition keeps its vital role in economic development. Achieving clean energy policies has been the most crucial issue in our time and has paid the attention of governments and policymakers in the context of sustainable development goals (SDGs). According to BP (2022), globally, renewable energy consumption increased by 12.6% between 2011 and 2021. For this reason, there has been significant attention to factors affecting renewable energy. Economic growth, foreign direct investment, technological improvement, trade openness, and financial development play an imperative role in renewable energy. In addition to these factors, qualitative factors such as democracy have a vital role in renewable energy for developing countries. In other words, energy policies can not be isolated from institutional factors that remarkably influence environmental policies (You et al., 2015). Romuald (2011) discussed that environmental quality is related to institutional quality. From the angle of democracy, theoretically, more democratic countries are sensitive to a cleaner environment and try to distribute resources toward cleaner production. Also, democratic countries have rigid policies which affect environmental regulation compared to the less-democratic countries (Chen et al., 2021). Therefore, citizens in democratic countries force policymakers to realize their renewable energy agenda (Saadaoui and Chtourou, 2022). Also, firms' lobbying and rent-seeking activities towards non-renewable energy are limited in more democratic countries (Sequeira and Santos, 2018). However, in a democratic country, it is not guaranteed that people always are interested in a clean environment. So, individuals sometimes ignore the demand for renewable energy thanks to the high cost of renewable energy, and it causes them to continue the usage of non-renewable energy sources. In this case, policymakers actualize the voters' preferences for traditional energy sources (Uzar, 2020). Although, it is expected that an increase in democracy rises renewable energy consumption, the political economy of the relationship between democracy and renewable energy consumption presents different views. Therefore, it is necessary to find more precise and robust findings regarding the impact of democracy on renewable energy consumption. Furthermore, apart from economic growth and democracy, globalization's relevance to renewable energy must be determined, which has not been investigated comprehensively for developing countries. It is assessed that there exist different ways to increase renewable energy through globalization in developing countries. Firstly, wellknown renewable energy technology needs massive financial sources to establish the required infrastructure investment for renewable energy. In this stage, foreign direct investment, capital investment, financial inflow, and international trade may contribute to improving renewable energy investment (Awosusi et al., 2022). Based on this approach, it is assumed that globalization improves competitiveness across firms. It ensures the lower costs of generating renewable energy in host countries, increases energy efficiency, and attracts foreign financial to install renewable energy technology. Secondly, a higher degree of globalization causes a rise in the awareness of environmental quality across society and becomes more sensitive to environmental and climate change issues. Hence, globalization may alter the energy consumption patterns and habits of the people and increase renewable energy usage instead of non-renewable energy sources such as fossil fuels (Nan et al., 2022). Against the backdrop of prior studies, which have ignored the direct effect of democracy by using different indicators on renewable energy consumption, the role of globalization in shaping renewable energy consumption, this study aims to investigate the effect of democracy and globalization on renewable energy consumption for the Central and Eastern European Countries-CEECs (Bulgaria, Czechia, Hungary, Poland, Romania, Slovakia, Slovenia, Estonia, Latvia, and Lithuania) from 1995 to 2021. In our study, the reasons for including the CEECs are as follows: • After the Cold War and the collapse of the Soviet Union, most of the CEECs have strived to continue their democratization paths for capturing solid democratic institutions. Thus, it is ambiguous whether democratization contributes to sustainable development by increasing renewable energy consumption in the CEECs. • Furthermore, the CEECs have started to liberalize their economy for a long time. For this purpose, the impact of the globalization process on renewable energy consumption becomes more crucial in transition economies such as CEECs. According to the data from Figure 1, renewable energy consumption has an increasing trend between 1995 and 2021. All Central and Eastern European Countries have had upward momentum since 1995. Mainly Slovenia and Latvia are the most renewable energy-consuming countries. One of the distinguishing features of the CEECs is that while most of these countries belonged to the Socialist Bloc, they adopted policies to integrate with the global economy after the collapse of the Soviet Union. As a result, as can be seen from Figure 2, the KOF globalization index has increased significantly in all of these countries over the last thirty years. In this respect, the change of economic, political, and social structures in these countries with globalization has essential effects on energy policies. Another prominent feature of the CEECs is that these countries have also started to implement a democratization process for a long time. In this framework, although all of the countries aimed to improve the democratization process as members of the EU, it can be said that this remained at a limited level. Considering the participatory democracy in Figure 3 and the liberal democracy index in Figure 4, limited improvements were seen in certain countries between 1995-2021, while democracy in others worsened. Therefore, the issue of how these developments in the democratization process affect renewable energy consumption gains importance. Our study differs from another study as follows: (i) To the best of our knowledge, we consider this study to be the first to examine the impact of democracy by using different indicators and globalization on renewable energy consumption, specific to the Central and Eastern European Countries (CEECs); (ii) Unlike previous studies which have employed traditional techniques, our study performs the panel vector autoregressive (PVAR) estimation technique as a multivariate econometric method.  1995  1996  1997  1998  1999  2000  2001  2002  2003  2004  2005  2006  2007  2008  2009  2010  2011  2012  2013  2014  2015  2016  2017  2018  The rest of the paper is structured as follows: Section 2 explains the importance of renewable energy in the context of sustainable development goals; Section 3 summarizes the empirical literature review; Section 4 summarizes the data, models, and methodology; Section 5 provides empirical findings. Finally, Section 6 presents the conclusion and policy recommendations.  Lithuania generated from renewables by 2030. It is considerably below the aimed level-32% needed to achieve net zero (IEA, 2022). More importantly, the COVID-19 pandemic has revealed the importance of renewable energy sources such as electricity in maintaining economic activity, protecting lives, sustaining essential services, etc. (Sherpa et al., 2022).

Literature Review
As mentioned above, a vast body of literature emphasizes the importance of several factors. In this paper, we categorized the literature review under four headings in line with the variables used in the empirical model. The summary of the literature review is provided in Table 2.

Data and Variable Descriptions
When modeling renewable energy consumption, it is crucial to determine the significant factors influencing it. The main aim of the study is to investigate the impact of democracy and globalization on renewable energy consumption using annual data from Central and Eastern European Countries (Bulgaria, Czechia, Hungary, Poland, Romania, Slovakia, Slovenia, Estonia, Latvia, and Lithuania) spanning the period 1995 and 2021. The control variables comprised gross domestic per capita and CO2 emissions per capita. The variables and data sources are described in Table 3.

Empirical Model
Following the previous studies, the functional specification in this paper can be expressed as below: = ( , , , In Equation (2), REC represents per capita energy consumption from renewables (megawatt-hours), DEMpar and DEMlib denote participatory democracy and liberal democracy, respectively. The GDP is the gross domestic product per capita constant at 2015 US$ as a proxy of economic growth. Finally, the KOF is the overall globalization index, and CO2 represents carbon dioxide emissions (metric tons per capita).

Empirical Methodology
This study applies several econometric procedures step by step. We tested the cross-sectional dependency (CSD) and slope homogeneity in the first step. After testing the cross-sectional dependency and slope homogeneity, we tested the stationary properties of data through the panel unit root test, then co-integration, long-run parameters estimates, and causal relationships between variables. The process of econometric analysis is picturized in Figure  5.

Preliminary Tests Results
In the first stage of our empirical findings, it is critical to test the cross-sectional dependency and slope homogeneity in the model. Therefore, our empirical analysis starts with testing cross-sectional dependency and slope homogeneity among variables. The results of cross-sectional dependency and slope homogeneity are reported in Table 4. The outcomes from Table 4 reject the null hypothesis of no cross-sectional dependency among variables and confirms that the variables are heterogeneous in the panel at the 1% significance level. Therefore, after validating the presence of cross-sectional dependency and slope heterogeneity, second-generation unit root tests must be used to assess the stationarity of the variables. Thus, we have employed the CADF unit root test, and the results are reported in Table 5.   Table 6. The results of the Westerlund cointegration test in Table 6 demonstrate that the null hypothesis of no cointegration could be rejected at a 5% significance level, implying that lnREC, lnDem_Par, lnDem_Lib, lnGDP, lnKOF, and lnCO2 are cointegrated and move together in the long run.

PVAR Model Results
Before estimating the long-run parameters using the PVAR technique, the current step is determining the lag period suitable for constructing the PVAR model. The results of the lag length criteria are documented in Table 7. According to the MBIC, MAIC, and MQIC, the optimal lag of the PVAR model is one. After deciding the optimal lag length, we estimated the long-run parameters by performing PVAR based on the GMM equation. The PVAR regression results are offered in Table 8.  -0.488** 0.100 -0.081* -0.303 4.493* 0.636*** Note: Asteriks *,**, and *** denote significance level at 10%, 5%, and 1%, respectively. Test of overidentifying restriction: Indeed, this specification produces a Hansen's J statistics connected with a chi2 (108) = 111.785* at 10% levels, which in this context refers to the case where we with confidence can not reject the null hypothesis which states that the overidentification restrictions are not valid, thus making the specification valid.
There are six results in the PVAR model. Therefore, we can summarize the findings of the PVAR as follows: • Considering renewable energy consumption as the explanatory variable, renewable energy consumption positively affects all types of democracy (participatory and liberal) and CO2 emissions. A 1% increase in renewable energy consumption improves participatory democracy, liberal democracy, and CO2 emissions by 0.022%, 0.319%, and 0.753%, respectively. • Considering participatory democracy as the explanatory variable, participatory democracy positively affects renewable energy consumption and globalization while negatively affecting liberal democracy, economic growth, and CO2 emissions. A 1% increase in participatory democracy increases renewable energy consumption and globalization by 2.774% and 0.435%, respectively; decreases liberal democracy, economic growth, and CO2 emissions by 0.671%, 0.286%, and 0.420%, respectively. • Considering liberal democracy as the explanatory variable, liberal democracy has a positive impact on participatory democracy, economic growth, globalization, and CO2 emissions. In contrast, it has a negative impact on renewable energy consumption. A 1% increase in liberal democracy increases participatory democracy, economic growth, globalization, and CO2 emissions by 0.208%, 0.145%, 1.977%, and 0.276%, respectively; decreases renewable energy consumption by 0.984%. • Considering economic growth as the explanatory variable, economic growth positively impacts participatory democracy, liberal democracy, globalization, and CO2 emissions, whereas it negatively impacts renewable energy consumption. A 1% increase in economic growth increases participatory democracy, liberal democracy, globalization, and CO2 emissions by 0.429%, 0.652%, 1.074%, and 1.083%, respectively; decreases renewable energy consumption by 1.040%. • Considering globalization as the explanatory variable, globalization positively affects renewable energy consumption. On the contrary, it negatively affects participatory democracy, liberal democracy, economic growth, and CO2 emissions. A 1% increase in globalization increases renewable energy consumption by 0.005%; decreases participatory democracy, liberal democracy, economic growth, and CO2 emissions by 0.005%, 0.005%, 0.004%, and 0.004%, respectively. • Considering CO2 emissions as the explanatory variable, CO2 emissions positively affects globalization, whereas it negatively influences renewable energy consumption and liberal democracy. A 1% increase in CO2 emissions increases globalization by 4.493% and decreases renewable energy consumption and liberal democracy by 0.488% and 0.081%, respectively.

3. Panel VAR Granger causality test results
Further, this study employs the causality test to check the causal relationships among variables. The results of the PVAR Granger causality (Wald) test are provided in Table 9.  • The panel VAR Granger causality outcomes provide a two-way causal relationship between renewable energy consumption-liberal democracy, renewable energy consumption-economic growth, renewable energy consumption-globalization, and renewable energy consumption-CO2 emissions.
• There is a two-way causal relationship between participatory democracy-liberal democracy, participatory democracy-economic growth, participatory democracy-globalization, and a one-way causality relationship running from participatory democracy to renewable energy consumption and CO2 emissions. • There is a two-way causal relationship between liberal democracy-globalization and a one-way causality relationship running from liberal democracy to CO2 emissions. • There is a two-way causal relationship between economic growth-globalization and a one-way causality relationship running from economic growth to liberal democracy and CO2 emissions. • There is a one-way causal relationship running from globalization to CO2 emissions. The PVAR model does not only analyze the coefficient estimators among variables. In addition, it allows us to follow the dynamic response of variables to one another. This technique is called the impulse-response function, and our impulse-response analysis result is provided in Figure 6. According to the results of the impulse-response analysis, where renewable energy consumption is a dependent variable; renewable energy consumption increases due to a one-unit change in globalization and economic growth. On the other hand, due to a one-unit change liberal democracy, participatory democracy, and in CO2 emissions, renewable energy consumption does not reflect any change in the first period. Then, however, it starts to decrease in the next period.

Conclusions and Policy Directions
As a crucial determinant of environmental quality, renewable energy has taken great attention from policymakers and researchers. Although the factors affecting renewable energy have been extensively investigated, no significant body of literature focuses on the effects of democracy and globalization on renewable energy. In the relevant literature, mainly the determinants of renewable energy have been analyzed in the context of quantitative factors. However, there are several qualitative factors, such as democracy, affecting renewable energy policies in developing countries. Therefore, the possible impacts of democracy and globalization on renewable energy are needed to reveal clearly for developing countries. For this purpose, this study examines the impact of democracy and globalization by controlling the role of economic growth and CO2 emissions for a panel of 10 Central and Eastern European Countries (CEECs) (Bulgaria, Czechia, Hungary, Poland, Romania, Slovakia, Slovenia, Estonia, Latvia, and Lithuania) from 1995 to 2021. We used the PVAR estimation technique and the PVAR Granger causality tests to check for the long-run parameters' estimate and examine the direction of causalities between variables. Considering renewable energy consumption as the dependent variable, participatory democracy and globalization positively affect renewable energy consumption, while liberal democracy, economic growth, and CO2 emissions negatively affect it. Our (2021) found that democracy causes to increase in environmental degradation. The opposite effects of participatory and liberal democracy on renewable energy consumption are required to explain. As Lv (2017) emphasized that the relationship between democracy and environmental quality offers controversial views. The impact of democracy on environmental quality and renewable energy is heterogeneous in the relevant literature. In the CEECs as a whole, the quality of democracy is still far from maturity compared to developed countries. Thus, if individuals can participate much more in the decision process related to the environment and energy policy, the energy transition will be easy and more substantial. Participatory democracy means citizens have a more significant say in decision-making than in liberal democracy. Particularly in the decisions to be taken on societal issues, the fact that there is a more participatory process ensures the empowerment of individuals and citizens. The impact of economic growth on renewable energy consumption is negative. It indicates that an increase in GDP per capita decreases renewable energy consumption instead of increasing it. This finding is consistent with Cadoret and Padovano (2016), Zhao and Luo (2017), and Uzar (2020), who obtained that economic growth has a negative impact on renewable energy. However, this finding is different from Sadorsky (2009a), Sadorsky (2009b), Apergis and Payne (2014), and Eren et al. (2019), who found that economic growth positively influences renewable energy. In our model, the negative impact of economic growth on renewable energy can be caused by some reasons. An increase in economic growth causes to rise in energy demand. In this case, with the high cost of stock and establishment for renewable energy, individuals tend to consume more non-renewable energy sources accessible to people. Thus, the impact of economic growth on renewable energy becomes negative (Uzar, 2020). According to the findings, globalization positively affects renewable energy consumption. This finding is consistent with the results of Gozgor  . Generally, an increase in CO2 emissions is expected to enhance renewable energy consumption in terms of cleaner and sustainable environmental policies. However, the empirical findings can be differed depending on the countries' development level. Notably, the commitment of international agreements such as the Kyoto protocol and the Paris Agreement should care little about renewable energy consumption in developing countries. Hence, CO2 emissions do not cause to increase in renewable energy consumption as expected. Based on our empirical findings, the following policy suggestions are proposed: • Economic growth reduces renewable energy consumption. As Uzar (2020) mentioned, if people focus on the cost of renewable energy consumption, economic growth may not promote environmental quality through increasing renewable energy consumption. Because, in this case, people prefer to consume cheap non-renewable energy sources. Thus, policymakers should promote renewable energy consumption through some incentives (for example, taxes exemption and credit loans). • Participatory democracy promotes renewable energy consumption, while liberal democracy negatively affects renewable energy consumption. This means that if people participate actively in the decisionmaking process, which is associated with the public interest. Thus, policymakers should establish policies to increase democratic institutions that allow for deciding options in terms of environmental policies. In this regard, ensuring democratic awareness can play a key role in ensuring environmental quality. • Globalization positively affects renewable energy consumption. Globalization offers new views regarding environmental quality and attracting renewable energy through foreign investment and trade. Therefore, removing bureaucratic barriers and tariffs and promoting foreign direct investment in renewable energy is crucial for sustainable development. Furthermore, international cooperation between developed and CEECs in the contexts of technology transfer and technological improvement through globalization can be strengthened to support and expand renewable energy resources in the CEECs. • The COVID-19 pandemic showed us that clean energy systems are vital for all spheres of life. Hence, it is necessary to make an effort to transiting toward renewable energy systems to capture the SDG 7 target. More coordinated and comprehensive domestic policies and international cooperation can be convenient options to ensure SDGs in this framework. • Policymakers in these countries should implement more stringent environmental regulations and increase the environmental awareness of individuals. Although this study contributes to the literature, it has some limitations. Firstly, we use the overall KOF globalization index, which includes economic, social, and political globalization dimensions. As a result, future studies can investigate the effects of different dimensions of globalization separately. Secondly, we used gross domestic per capita and CO2 emissions as control variables. Future studies can also examine the impact of environmental taxes and renewable energy costs.