The Correlation between Energy Cost Share, Human, and Economic Development: Using Time Series Data from Australasia, Europe, North America, and the BRICS Nations

Ryan Roberts,Matthew Heun,Josephine Musango,Alan Brent

doi:10.3390/en11092405

Abstract

This paper investigates how a change in a region’s energy cost share (ECS), a ratio of a region’s energy expenditure as a fraction of its gross domestic product (GDP), affects the region’s social and economic development. Nations from four regions of the world, namely Australasia, Europe, North America, and the BRICS nations (Brazil, Russia, India, China, and South Africa) were chosen for this study. Using time series data from the period of 1978 to 2010, the annual ECS of each country was compared to the year-on-year GDP change, as well as the components of the human development index (HDI). High ECS values were seen to correlate with low economic development. The existence of an ECS threshold was found in 14 of the 15 countries, for all the regions, and for the worldwide analysis, with very strong correlation coefficients obtained for periods of high ECS. New to this field of research, this study also investigated the effects of ECS on gross national income (GNI) per capita change, as well as the effects of 0, 1, 2, and 3 year lags. This investigation found that ECS has a very strong correlation to GNI per capita change, which was much stronger than the correlation between ECS and GDP change. The effects of ECS on social and economic development occurred after varying time lags, and it is unique to each country and region. Regions with similar ECS dynamics were identified, with possible reasons for the similarities being provided.

Highlights

Rising global temperatures and fossil fuel depletion have created an urgency for a shift towards clean energy
The goal of this paper is to investigate the effects of the energy cost share (ECS), a ratio of energy expenditure to gross domestic product (GDP), Energies 2018, 11, 2405; doi:10.3390/en11092405
44 countries making up approximately 95% of global GDP, was plotted alongside the ECS data calculated in this study

Summary

Introduction

Rising global temperatures and fossil fuel depletion have created an urgency for a shift towards clean energy. While the subsequent environmental benefits have been well documented, a blind eye cannot be turned on the social and economic challenges facing many nations today. A transition to cleaner energy sources would most likely lead to a change in energy costs, which would impact the society and the economy of many nations and regions. The goal of this paper is to investigate the effects of the energy cost share (ECS), a ratio of energy expenditure to gross domestic product (GDP), Energies 2018, 11, 2405; doi:10.3390/en11092405 www.mdpi.com/journal/energies. Energies 2018, 11, 2405 on social and economic development. This is vital to understand in order to construct the energy and environmental policies that can advance society in a sustainable manner.

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