Trade Flows in Renewable Energy Industry in Malaysia: Evidence from a Gravity Model

Abstract

The main objectives of this paper are to investigate the interactions between trade flows and technological development with regard to environmental technologies, and
estimate empirically the effect of renewable energy demand on the competitiveness of domestic manufacturing firms in Malaysia. By using a gravity model of international
trade with a balanced dataset of 19 countries that have trade flows of renewable energy industries from Malaysia covering the period 2009-2017.The econometric model shows evidence of a positive effect of environmental regulations that promote the use of renewable energy on the export performance and competitiveness of renewable energy manufacturing industries in Malaysia. The results indicate that Porter hypothesis is valid so that whenever the emission of CO2 in the destination country decreases 1% the trade flows of renewable energy increases by 34% in Malaysia.