Electricity generation from renewable and non-renewable energy sources in China: The role of environmental policy stringency, FDI, and economic growth

The wave of industrialization and globalization comes with increased energy demand. To curb rising emissions levels in China, energy production from renewable sources (EPR) is imperative. Therefore, this study assesses the effects of environmental policy stringency (EPS), economic growth, and FDI on EPR and non-renewable sources (EPNR) in China from 1989 to 2022 using the novel wavelet quantile correlation (WQC) approach. The WQC shows different directions and magnitudes of the relationship between the variables across all quantile distributions. The results reveal that EPS tames EPNR over the short run but increases it over the medium and long-run periods. FDI increases EPNR over the short run, with opposite impacts in the medium- and long-run periods. Furthermore, FDI increases EPR in the medium- and long-run periods. However, FDI reduces EPR across all quantile levels in the short run. Although economic growth has a significant negative association with EPNR in the long run, its association with EPR was significantly positive across all quantiles in the long-run period. Relevant policy prescriptions targeted at increasing EPR have been discussed alongside the directions for future studies. • The role of environmental policy stringency (EPS) on electricity production is examined. • EPS increases electricity production from renewable sources. • EPS decreases electricity production from non-renewable energy sources. • Foreign Direct Investment increases electricity production from renewable sources. • Policy recommendations to achieve SDG 7 and SDG 13 are proposed.