The significance of renewable energy use for economic output and environmental protection: Evidence from the next 11 developing economies

Paramati, Sudharshan Reddy and Sinha, Avik and Dogan, Eyup (2017): The significance of renewable energy use for economic output and environmental protection: Evidence from the next 11 developing economies. Published in: Environmental Science and Pollution Research , Vol. 24, No. 15 (2017): pp. 13546-13560.

Abstract

Increasing economic activities in developing economies are raising demand for energy which is mainly sourced from conventional sources. The consumption of more conventional energy sources will have a significant negative impact on the environment. Therefore, the attention of the policy makers, recently, has shifted towards the promotion of renewable energy generation and uses across the economic activities to ensure the low carbon economy. Given the recent scenario, in this paper, we aim to examine the role of renewable energy consumption on the economic output and CO2 emissions of the next fastest developing economies of the world. The study makes use of annual data from 1990 to 2012 and employs several robust panel econometric models. The empirical findings confirm the significant long-run association among the variables. Similarly, the results show that the renewable energy consumption positively contributes to economic output and has an adverse effect on the CO2 emissions. Given our findings, we suggest the policy makers of those economies to initiate further effective policies to promote more renewable energy generation and uses across the economic activities to ensure sustainable economic development.

• Item Type: MPRA Paper
• Language: English
• Keywords: Renewable energy consumption, Sustainable economic development, CO2 emissions, Developing economies
• Subjects: Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q5 - Environmental Economics; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q5 - Environmental Economics > Q53 - Air Pollution ; Water Pollution ; Noise ; Hazardous Waste ; Solid Waste ; Recycling

References

Alam, M.S., Paramati, S.R., 2015. Do oil consumption and economic growth intensify environmental degradation? Evidence from developing economies. Applied Economics, 47(48), 5186-5203.

Alam, M.S., Paramati, S.R., 2016. The impact of tourism on income inequality in developing economies: Does Kuznets curve hypothesis exist?. Annals of Tourism Research, 61, 111-126.

Alam, M. S., Paramati, S. R., Shahbaz, M., Bhattacharya, M., 2016. Natural gas, trade and sustainable growth: empirical evidence from the top gas consumers of the developing world. Applied Economics, 1-15.

Al-mulali, U., Fereidouni, H.G., Lee, J.Y., Sab, C.N.B.C., 2013. Examining the bi-directional long run relationship between renewable energy consumption and GDP growth. Renewable and Sustainable Energy Reviews, 22, 209-222.

Apergis, N., Payne, J.E., 2010a. Renewable energy consumption and growth in Eurasia. Energy Economics, 32(6), 1392-1397.

Apergis, N., Payne, J. E., 2010b. Renewable energy consumption and economic growth: evidence from a panel of OECD countries. Energy policy, 38(1), 656-660.

Apergis, N., Payne, J.E., 2014. The causal dynamics between renewable energy, real GDP, emissions and oil prices: evidence from OECD countries. Applied Economics, 46(36), 4519-4525.

Apergis, N., Payne, J.E., 2015. Renewable energy, output, carbon dioxide emissions, and oil prices: evidence from South America. Energy Sources, Part B: Economics, Planning, and Policy, 10(3), 281-287.

Apergis, N., Payne, J.E., Menyah, K., Wolde-Rufael, Y., 2010. On the causal dynamics between emissions, nuclear energy, renewable energy, and economic growth. Ecological Economics, 69(11), 2255-2260.

Aslan, A., Gozbasi, O., 2016. Environmental Kuznets curve hypothesis for sub-elements of the carbon emissions in China. Natural Hazards, 82(2), 1327-1340.

Aslan, A., Ocal, O., 2016. The role of renewable energy consumption in economic growth: Evidence from asymmetric causality. Renewable and Sustainable Energy Reviews, 60, 953-959.

Awan, A.A., 2015. Renewable Energy in Pakistan: Potential and Prospects. Alternative Energy Development Board, Government of Pakistan.

Bangladesh Power Development Board, 2016. Development of Renewable Energy Technologies by BPDB. Retrieved from: http://www.bpdb.gov.bd/bpdb/index.php?option=com_content&view=article&id=26

Bhattacharya, M., Paramati, S.R., Ozturk, I., Bhattacharya, S., 2016. The effect of renewable energy consumption on economic growth: Evidence from top 38 countries. Applied Energy, 162, 733-741.

Bildirici, M.E., 2012. The relationship between economic growth and biomass energy consumption. Journal of Renewable and Sustainable Energy, 4(2), 5.

Bölük, G., 2013. Renewable Energy: Policy Issues and Economic Implications in Turkey. International Journal of Energy Economics and Policy, 3(2), 153-167.

Boon, E.M., Marletta, M.A., 2006. Sensitive and selective detection of nitric oxide using an H-NOX domain. Journal of the American Chemical Society, 128(31), 10022-10023.

Brain, J.D., Valberg, P.A., 1979. Deposition of aerosol in the respiratory tract 1–3. American Review of Respiratory Disease, 120(6), 1325-1373.

Brimblecombe, P., 1996. Air Composition and Chemistry. Cambridge University Press, Cambridge.

Burger, A., 2015. Egypt’s Renewable Energy Drive Gains Steam. Renewable Energy World. June 9, 2015. Retrieved from: http://www.renewableenergyworld.com/articles/2015/06/egypt-s-renewable-energy-drive-gains-steam.html

Cabré, M.M., Lopez-Peña, A., Kieffer, G., Khalid, A., Ferroukhi, R., 2015. Renewable Energy Policy Brief: MEXICO. International Renewable Energy Agency (IRENA), Abu Dhabi.

Chien, T., Hu, J.L., 2007. Renewable energy and macroeconomic efficiency of OECD and non-OECD economies. Energy Policy, 35(7), 3606-3615.

Dietz, T., Rosa, E.A., 1994. Rethinking the environmental impacts of population, affluence and technology. Human Ecology Review, 1, 277-300.

Dietz, T., Rosa, E.A., 1997. Effects of population and affluence on CO2 emissions. Proceedings of the National Academy of Sciences, 94(1), 175-179.

Dogan, E., 2015. The relationship between economic growth and electricity consumption from renewable and non-renewable sources: A study of Turkey. Renewable and Sustainable Energy Reviews, 52, 534-546.

Dogan, E., 2016. Analyzing the linkage between renewable and non-renewable energy consumption and economic growth by considering structural break in time-series data. Renewable Energy, 99, 1126-1136.

Dogan, E., Seker, F., 2016a. Determinants of CO2 emissions in the European Union: The role of renewable and non-renewable energy. Renewable Energy, 94, 429-439.

Dogan, E., Seker, F., 2016b. The influence of real output, renewable and non-renewable energy, trade and financial development on carbon emissions in the top renewable energy countries. Renewable and Sustainable Energy Reviews, 60, 1074-1085.

Dumitrescu, E.I., Hurlin, C., 2012. Testing for Granger non-causality in heterogeneous panels. Economic Modelling, 29(4), 1450-1460.

Eghbal, M., 2008. The Next 11 Emerging Economies. Euromonitor International. Retrieved from: http://blog.euromonitor.com/2008/02/the-next-11-emerging-economies.html.

Ehrlich, P.R., Holdren, J.P., 1971. Impact of population growth. Science, 171(1), 1212-1217.

Fang, Y., 2011. Economic welfare impacts from renewable energy consumption: the China experience. Renewable and Sustainable Energy Reviews, 15(9), 5120-5128.

Farhani, S., 2013. Renewable energy consumption, economic growth and CO2 emissions: Evidence from selected MENA countries. Energy Economics Letters, 1(2), 24-41.

Fronda, A.D., 2015. Philippines Renewable Energy Policy Updates. Renewable Energy Management Bureau, Department of Energy.

Granger, C.W.J., 1969. Investigating Causal Relations by Econometric and Cross-Spectral Methods. Econometrica, 37(3), 424-438.

Hastwell, G., 1975. Salbutamol aerosol in premature labour. The Lancet, 306(7946), 1212-1213.

Im, K. S., Pesaran, M. H., Shin, Y., 2003. Testing for unit roots in heterogeneous panels. Journal of Econometrics, 115(1), 53-74.

Inglesi-Lotz, R., 2014. The Impact of Renewable energy consumption to economic welfare: A panel data application. Energy Economics, 53, 58-63.

Jebli, M.B., 2016. On the causal links between health indicator, output, combustible renewables and waste consumption, rail transport, and CO2 emissions: the case of Tunisia. Environmental Science and Pollution Research, 1-17.

Johansen, S., 1991. Estimation and hypothesis testing of cointegration vectors in Gaussian vector autoregressive models. Econometrica, 59(6), 1551-1580.

Levin, A., Lin, C.F., Chu, C.S.J., 2002. Unit root tests in panel data: asymptotic and finite-sample properties. Journal of Econometrics, 108(1), 1-24.

Maddala, G.S, Wu, S., 1999. A comparative study of unit root tests with panel data and a new simple test. Oxford Bulletin of Economics and statistics, 61, 631-652.

Mahapatra, S., 2016. Indonesia Plans To Set Up Renewable Energy Utility. Clean Technica. January 12, 2016. Retrieved from: https://cleantechnica.com/2016/01/12/indonesia-plans-set-renewable-energy-utility/

Mbarek, M.B., Saidi, K., Feki, R., 2016. How Effective Are Renewable Energy in Addition of Economic Growth and Curbing CO2 Emissions in the Long Run? A Panel Data Analysis for Four Mediterranean Countries. Journal of the Knowledge Economy, 1-13.

Menyah, K., Wolde-Rufael, Y., 2010. CO2 emissions, nuclear energy, renewable energy and economic growth in the US. Energy Policy, 38(6), 2911-2915.

Ministry of Power, 2015. National Renewable Energy and Energy Efficiency Policy (NREEEP): Approved By FEC for the Electricity Sector. Federal Republic of Nigeria.

Noi, H., 2016. Renewable energy - Viet Nam’s power future. United Nations Development Programme. May 24, 2016. Retrieved from: http://www.vn.undp.org/content/vietnam/en/home/presscenter/pressreleases/2016/05/24/renewable-energy-viet-nam-s-power-future.html

Ozturk, I., Bilgili, F., 2015. Economic growth and biomass consumption nexus: Dynamic panel analysis for Sub-Sahara African countries. Applied Energy, 137, 110-116.

Pao, H.T., Fu, H.C., 2013a. Renewable energy, non-renewable energy and economic growth in Brazil. Renewable and Sustainable Energy Reviews, 25, 381-392.

Pao, H.T., Fu, H.C., 2013b. The causal relationship between energy resources and economic growth in Brazil. Energy Policy, 61, 793-801.

Paramati, S.R., Alam, M.S., Chen, C.F., 2016. The Effects of Tourism on Economic Growth and CO2 Emissions A Comparison between Developed and Developing Economies. Journal of Travel Research, 0047287516667848.

Paramati, S.R., Apergis, N., Ummalla, M, 2017. Financing clean energy projects through domestic and foreign capital: The role of political cooperation among the EU, the G20 and OECD countries. Energy Economics, 61, 62-71.

Paramati, S.R., Shahbaz, M., Alam, M.S., 2017. Does tourism degrade environmental quality? A comparative study of Eastern and Western European Union. Transportation Research Part D: Transport and Environment, 50, 1-13.

Paramati, S.R., Ummalla, M., Apergis, N., 2016. The effect of foreign direct investment and stock market growth on clean energy use across a panel of emerging market economies. Energy Economics, 56, 29-41.

Pedroni, P., 2000. Fully modified OLS for heterogeneous cointegrated panels,” in Baltagi, B.H. ed., Nonstationary panels, panel cointegration and dynamic panels, 15, Amsterdam: Elsevier, 93-130.

Pedroni, P., 2001a. Fully modified OLS for heterogeneous cointegrated panels. Advances in Econometrics, 15, 93-130.

Pedroni, P., 2001b. Purchasing power parity tests in cointegrated panels. Review of Economics and Statistics, 83(4), 727-731.

Penkett, S., Jones, B.M.R., Brich, K.A., Eggleton, A.E., 1979. The importance of atmospheric ozone and hydrogen peroxide in oxidising sulphur dioxide in cloud and rainwater. Atmospheric Environment, 13(1), 123-137.

Pesaran, M.H., 2004. General diagnostic tests for cross section dependence in panels. University of Cambridge, Faculty of Economics, Cambridge Working Papers in Economics No. 0435.

Raskin, P.D., 1995. Methods for estimating the population contribution to environmental change. Ecological Economics, 15(3), 225-233.

Renewable Energy Policy Network for the 21st Century (REN21), 2016. Renewables 2013 Global Status Report. Paris.

Sadorsky, P., 2009. Renewable energy consumption and income in emerging economies. Energy Policy, 37(10), 4021-4028.

Sebri, M., Ben-Salha, O., 2014. On the causal dynamics between economic growth, renewable energy consumption, CO2 emissions and trade openness: fresh evidence from BRICS countries. Renewable and Sustainable Energy Reviews, 39, 14-23.

Shahbaz, M., Mahalik, M.K., Shah, S.H., Sato, J.R., 2016. Time-varying analysis of CO2 emissions, energy consumption, and economic growth nexus: Statistical experience in next 11 countries. Energy Policy, 98, 33-48.

Shin, S., 2015. Four point plan for promoting renewable energy in South Korea. Center for Energy & Environmental Policy. Retrieved from: http://ceep.udel.edu/four-point-plan-for-promoting-renewable-energy-in-south-korea/

Silva, S., Soares, I., Pinho, C., 2012. The impact of renewable energy sources on economic growth and CO2 emissions-a SVAR approach. European Research Studies, 15(4), 133-144.

Sinha, A., Bhattacharya, J., 2016. Environmental Kuznets Curve estimation for NO2 emission: A case of Indian cities. Ecological Indicators, 67, 1-11.

Sinha, A., Bhattacharya, J., 2017. Environmental Kuznets Curve estimation for SO2 emission: A case of Indian cities. Ecological Indicators, 72, 881-894.

Tiwari, A.K., 2011. A structural VAR analysis of renewable energy consumption, real GDP and CO2 emissions: evidence from India. Economics Bulletin, 31(2), 1793-1806.

Tugcu, C.T., Ozturk, I., Aslan, A., 2012. Renewable and non-renewable energy consumption and economic growth relationship revisited: evidence from G7 countries. Energy Economics, 34(6), 1942-1950.

U.S. Energy Information Administration (EIA), 2012. International Energy Statistics. Retrieved from: http://www.eia.gov/cfapps/ipdbproject/IEDIndex3.cfm?tid=1&pid=1&aid=8.

Watkins, W.M., Mosobo, M., 1993. Treatment of Plasmodium falciparum malaria with pyrimethamine-sulfadoxine: selective pressure for resistance is a function of long elimination half-life. Transactions of the Royal Society of Tropical Medicine and Hygiene, 87(1), 75-78.

Wheeler, E., Desai, M., 2016. Iran’s Renewable Energy Potential. Middle East Institute. Jan 26, 2016. Retrieved from: http://www.mei.edu/content/article/iran%E2%80%99s-renewable-energy-potential.

Whitby, K.T., 1978. The physical characteristics of sulfur aerosols. Atmospheric Environment, 12(1), 135-159.

World Bank, 2012. World Development Indicators. Retrieved from: http://data.worldbank.org/indicator.

Yıldırım, E., Sukruoglu, D., Aslan, A., 2014. Energy consumption and economic growth in the next 11 countries: The bootstrapped autoregressive metric causality approach. Energy Economics, 44, 14-21.

York, R., Rosa, E.A., Dietz, T., 2002. Bridging environmental science with environmental policy: Plasticity of population, affluence, and technology. Social Science Quarterly, 83(1), 18-34.

Zeb, R., Salar, L., Awan, U., Zaman, K., Shahbaz, M., 2014. Causal links between renewable energy, environmental degradation and economic growth in selected SAARC countries: Progress towards green economy. Renewable Energy, 71, 123-132.