Renewable and nonrenewable energy consumption, economic growth, and CO2 emissions in Eastern and South African countries: the role of informality.

Abstract

This study investigates the role of informality in the relationship among renewable and nonrenewable energy consumption, economic growth, and CO2 emissions in a panel of 19 Eastern and South African countries. The empirical strategy exploits the panel generalized method of moments, panel fixed effects models using the Driscoll-Kraay standard errors, panel method of moments quantile regressions, and the Dumitrescu-Hurlin bootstrap panel Granger causality analysis. The results are fourfold. First, nonrenewable energy consumption is positively associated with CO2 emissions, while renewable energy consumption is not. Second, there is a nonlinear ∩ -shaped relationship between economic growth and CO2 emissions, consistent with the environmental Kuznets curve (EKC) hypothesis. Third, the results show a nonlinear ∪ -shaped relationship between informality and CO2 emissions, suggesting that higher informality is associated with lower CO2 emissions up to a certain critical point beyond which further increases in informality precipitate higher CO2 emissions. Fourth, the results show unidirectional causality from CO2 emissions to renewable energy, from CO2 emissions to nonrenewable energy, from informality to CO2 emissions, and feedback causality between GDP growth and CO2 emissions.