The effect of electricity consumption from renewable sources on countries׳ economic growth levels: Evidence from advanced, emerging and developing economies

Abstract

Abstract This paper uses a sample of 36 countries for the time period 1990–2011 in order to examine the relationship between countries׳ electricity consumption from renewable sources and Gross Domestic Product (GDP) levels. Several nonparametric techniques are applied to investigate the effect of electricity consumption from several renewable sources including wind, geothermal, solar, biomass and waste on countries׳ GDP levels. When investigating the whole sample ignoring countries׳ economic development status, the results reveal an increasing relationship up to a certain GDP level, which after that point the effect of electricity consumption on GDP stabilises. However when analyzing separately the ‘Emerging Markets and Developing Economies’, and, the ‘Advanced-Developed Economies’, the results change significantly. For the case of Emerging Market and Developing Economies the relationship appears to be highly nonlinear (an M-shape form) indicating that on those countries the levels of electricity consumption from renewable sources will not result on higher GDP levels. In contrast for the case of the advanced economies the results reveal an increasing nonlinear relationship indicating that higher electricity consumption levels from renewable sources results to higher GDP levels. This finding is mainly attributed to the fact that in the advanced-developed economies more terawatts from renewable sources are generated and consumed compared to the emerging market and developing economies, which traditionally their economies rely on non-renewable sources for power generation and consumption.