Abstract
Energy is a crucial development indicator of production, consumption, and nation-building. However, energy diversification highlighting renewables remains salient in economic development across developing economies. This study explores the economic impact of renewables (RE) and fossil fuel (NRE) utilization in 17 emerging nations. We use annual data with timeframe between 1980 and 2016 and propose a bootstrap panel causality approach with a Fourier function. This allows the examination of multiple structural breaks, cross-section dependence, and heterogeneity across countries. We validate four main hypotheses on the causal links attached to the energy consumption (EC)-growth nexus namely neutrality, conservation, growth, and feedback hypotheses. The findings reveal a causal relationship running from RE to GDP for Brazil, Egypt, Indonesia, Korea, Pakistan, and the Philippines, confirming the growth hypothesis. Besides, the results validate the conservation hypothesis with causality from GDP to RE for China, Colombia, Egypt, Greece, India, Korea, South Africa, and Turkey. We identify causality from NRE to GDP for Pakistan, Mexico, Malaysia, Korea, India, Greece, Egypt, and Brazil; and from GDP to NRE for Thailand, Peru, Malaysia, India, Greece, Egypt, and Colombia. We demonstrate that wealth creation can be achieved through energy diversification rather than relying solely on conventional energy sources.
Highlights
Energy has long been considered a substantial driver of economic growth, and traditional energy demand, following an upward trend for many decades (Sadorsky, 2009; Ellabban et al, 2014)
Cross-section dependence may be caused by spatial effects, ignored common factors, or unobserved factors (Baltagi and Hashem Pesaran, 2007; Breitung and Pesaran, 2008)
This study examined the causal relationship between energy consumption and economic growth in 17 emerging countries throughout 1990–2017
Summary
Energy has long been considered a substantial driver of economic growth, and traditional energy demand, following an upward trend for many decades (Sadorsky, 2009; Ellabban et al, 2014). It has become common knowledge that increasing use of conventional energy sources such as oil, petroleum, and coal, to achieve economic growth—is associated with severe environmental degradation that affects both environment and Energy Diversification and Economic Development human health. Industrial states are forced to create and finance schemes to deal with climate change primarily driven by industrial operations. These problems propelled international communities and institutions to search for regular energy alternatives (Ozturk and Bilgili, 2015). Specialists highlight that cleaner energy sources can actively mitigate carbon emissions and preserve environmental quality (Yildirim, 2014; Owusu and Asumadu, 2016; Danish et al, 2017). A vast literature that unpacks the story of complex energy (EC)–growth nexus exists (Wolde-Rufael, 2009; Sarkodie et al, 2020)
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