Abstract
The role of renewable and fossil fuel energy consumption on environmental sustainability remains inconclusive due to varied economic and technological structure. This study provides new insight by assessing the nexus between the utilization of two energy categories — renewable and conventional, environmental quality and economic growth embodying capital, trade openness and government expenditure. A panel data of 45 Emerging Market and Developing Economies (EMDEs) from 1990 to 2014 was employed in the study. We applied heterogeneous panel data approach and second-generational econometric techniques that permit cross-sectional dependence and slope heterogeneity. The evaluation of long-term effects conducted by AMG, along with CCEMG and MG estimators revealed that besides other factors such as government expenditure, capital, and trade openness, non-renewable and renewable energy utilization significantly contributes to the economic growth of the selected EMDEs. The study acknowledges the trade-off effect between environmental quality and economic growth. Using Dumitrescu and Hurlin test, we found strong evidence to support the feedback hypotheses among renewable energy, consumption of conventional fuels, economic growth and CO2 emissions. From a policy perspective, the empirical findings recommend the implementation of effective policies that promote green power and economic structural adjustment in order to diminish the level of atmospheric CO2 emissions.
Highlights
The world economy almost doubled from 37.224 trillion US$ in 1990 to 72.247 trillion US$ in 2014 (World Bank, 2018)
This study investigated the influence of power utilization, together with CO2 emissions, capital formation, trade openness, and government expenditure, on the economic growth of 45 Emerging Market and Developing Economies (EMDEs) from 1990 to 2014
From the empirical findings generated by this work, we found that EMDEs rely on the increasing utilization of different energy sources for their economic activities
Summary
The world economy almost doubled from 37.224 trillion US$ (constant 2010 US$) in 1990 to 72.247 trillion US$ in 2014 (World Bank, 2018). Most of the available literature examined aggregated energy consumption, recent studies examine disaggregate energy consumption — renewable and conventional and its impact on economic growth (Kahia et al, 2017; Bekun et al, 2019a; Zafar et al, 2019). We enlarge the production function by employing the structure of energy consumption, government expenditure, capital, and trade openness as regressors — avoiding the omission of important variables and generating more robust results. This helps widen the current literature for EMDEs in a manner that is lacking in the existing literature. The remainder of the study is as follow: Section 2 specifies the empirical model; Section 3 demonstrates the estimated outcomes along with pertinent interpretations and Section 4 summarizes the empirical findings and provides policy recommendations for policy-makers
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