Urbanization and modern renewable energy consumption among East African community (EAC) countries: an empirical analysis

Abstract

PurposeModern renewable energy is crucial for environmental conservation, sustainable economic growth and energy security, especially in developing East African nations that heavily use traditional biomass. Thus, this study aims to examine urbanization and modern renewable energy consumption (MREC) in East African community (EAC) while controlling for gross domestic product (GDP), population growth, foreign direct investment (FDI), industrialization and trade openness (TOP).Design/methodology/approachThis study considers a balanced panel of five EAC countries from 1996 to 2019. Long-run dynamic ordinary least squares (DOLS) and fully modified ordinary least squares estimations were used to ascertain the relationships while the vector error-correction model was used to ascertain the causal relationship.FindingsResults show that urbanization, FDI, industrialization and TOP positively affect MREC. Whereas population growth and GDP reduce MREC, the effect for GDP is not that significant. The study also found a bidirectional causality between urbanization, FDI, TOP and MREC in the long run.Practical implicationsInvesting in modern renewable energy facilities should be a top priority, particularly in cities with expanding populations. The governments of the EAC should endeavor to make MREC affordable among the urban population by creating income-generating activities in the urban centers and sensitizing the urban population to the benefits of using MREC. Also, the government may come up with policies that enhance the establishment of lower prices for modern renewable energy commodities so as to increase their affordability.Originality/valueMREC is a new concept in the energy consumption literature. Much of the research focuses on renewable energy consumption including the use of traditional biomass which contributes to climate change negatively. Besides, the influence of factors such as urbanization has not been given significant attention. Yet urbanization is identified as a catalyst for MREC.