Chinese renewable energy industries’ boom and recession: Evidence from bubble detection procedure

• Published in: Energy policy 2020-03, Vol.138, p.1-10, Article 111200
• Main Authors: Wang, Kai-Hua, Su, Chi-Wei, Lobonţ, Oana-Ramona, Moldovan, Nicoleta-Claudia
• Format: Article
• Language: English
• Subjects: Anti dumping; Autonomy; Behavior; Bubble behaviour; Bubbles; Dumping; Economic crisis; Economic development; Economic growth; Energy; Energy development; Energy industry; Energy policy; Environmental degradation; Environmental protection; Generalized supremum ADF; Industrial development; International finance; International trade; Market value; Markets; Policy making; Public finance; R&D; Recessions; Renewable energy; Renewable energy industry; Renewable resources; Research & development; Social development; Solar energy; State intervention; Stock exchanges; Trade barriers; Trade policy; Weather; Wind
• ISSN: 0301-4215; 1873-6777
• DOI: 10.1016/j.enpol.2019.111200

This paper considers bubbles specific to Chinese renewable energy industries, including wind, solar and hydro through the Generalized Supremum Augmented Dickey-Fuller test. It applies the recursive procedure and cross-time occurrence to identify starting and ending points in each bubble. Combining with the bubble model, the empirical results reveal that renewable energy industrial stock price may deviate from their market value, and bubble behaviours exist in these industries. The potential reasons can be contributed to economic growth, trade barrier, government supportive policies, global financial crisis, and environmental protection pressure. More attention is further paid on special factors such as extreme windy weather, unfair anti-dumping investigation and less policy support which can explain certain bubbles in wind, solar and hydro industries. The renewable energy industries' boom and recession that evidence from bubble behaviour, would harm industrial development, influence thousands of people's lives, and bring challenges for Chinese energy structure and policies. Therefore, depending on the timely identification of explosive behaviours and bubbles, policymakers could set up prudent policy framework, reduce government intervention and render firms autonomy to maintain the sustained and healthy development of industries. More importantly, enterprises should increase research and development expenditure, upgrade technical standard and exploit international renewable energy market. •Bubbles that are specific to the Chinese wind, solar and hydropower industries.•The GSADF test is employed to recognize bubble periods for each industry.•The renewable energy industry boom and recession evidence from bubble behaviour.•Certain factors such as trade barrier are utilized to explain boom and recession.