Can Energy Efficiency Promote Human Development in a Developing Economy?

Abstract

It has recently been underscored that access to energy has adverse impacts upon human development in South Asia. In this paper, we apply different variants of the autoregressive distributed lag (ARDL) model to explain how improved access to energy might adversely impact human development in India over 1980–2018. From the basic ARDL model, a 1% increase (decrease) in energy efficiency will increase (lower) human development by 6.1% in the long run. We note that the causality runs from energy efficiency to human development. The application of the novel dynamic ARDL simulations offers two insights; first, it confirms the importance of energy efficiency for driving human development. Secondly, it shows asymmetric effects: we find that a 10% increase in energy efficiency boosts human development from 7% to 12% in the long run, while a 10% decrease in energy efficiency lowers human development from 7% to 3%. Using the frequency domain causality analysis, we establish that energy efficiency drives human development in India. We also explore the symmetric and asymmetric impacts of several control variables on human development in India. Our findings establish that energy efficiency will not only help India reduce its environmental footprint but also propel human development.