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The impact of renewable energy sources on economic growth and CO2 emissions - a SVAR approach

Author

Listed:
  • Susana Silva

    () (Faculdade de Economia da Universidade do Porto)

  • Isabel Soares

    () (CEF.UP and Faculdade de Economia da Universidade do Porto)

  • Carlos Pinho

    (Departamento de Economia, Gestão e Engenharia Industrial, Universidade de Aveiro)

Abstract

Over the last years renewable energy sources (RES) have increased their share on electricity generation of most developed economies due to environmental and security of supply concerns. The aim of this paper was to analyze how an increasing share of RES on electricity generation (RES-E) affects Gross Domestic Product (GDP) and carbon dioxide (CO2) emissions. Several methodologies could be used for this purpose. The Structural Vector Autoregressive (SVAR) methodology considers the interactions among all variables in the model and is well suited to predict the effects of specific policy actions or important changes in the economy. Therefore, we chose to implement this methodology. We used a 3 variable SVAR model for a sample of four countries along the period 1960-2004. The existence of unit roots was tested to infer the stationarity of the variables. The countries chosen have rather different levels of economic development and social and economic structures but a common effort of investment in RES in the last decades. Through the impulse response functions (IRF), the SVAR estimation showed that, for all countries in the sample, except for the USA, the increasing RES-E share had economic costs in terms of GDP per capita. As expected, there was also an evident decrease of CO2 emissions per capita. The variance decomposition showed that a significant part of the forecast error variance of GDP per capita and a relatively smaller part of the forecast error variance of CO2 per capita were explained by the share of RES-E.

Suggested Citation

  • Susana Silva & Isabel Soares & Carlos Pinho, 2011. "The impact of renewable energy sources on economic growth and CO2 emissions - a SVAR approach," FEP Working Papers 407, Universidade do Porto, Faculdade de Economia do Porto.
  • Handle: RePEc:por:fepwps:407
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    File URL: http://www.fep.up.pt/investigacao/workingpapers/11.03.03_wp407.pdf
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    References listed on IDEAS

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    1. Wolde-Rufael, Yemane, 2004. "Disaggregated industrial energy consumption and GDP: the case of Shanghai, 1952-1999," Energy Economics, Elsevier, vol. 26(1), pages 69-75, January.
    2. Ferreira, Paula & Soares, Isabel & Araujo, Madalena, 2005. "Liberalisation, consumption heterogeneity and the dynamics of energy prices," Energy Policy, Elsevier, vol. 33(17), pages 2244-2255, November.
    3. Jonathan Kohler, Terry Barker, Dennis Anderson and Haoran Pan, 2006. "Combining Energy Technology Dynamics and Macroeconometrics: The E3MG Model," The Energy Journal, International Association for Energy Economics, vol. 0(Special I), pages 113-134.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. repec:eee:enepol:v:113:y:2018:i:c:p:356-367 is not listed on IDEAS
    2. Maslyuk, Svetlana & Dharmaratna, Dinusha, 2013. "Renewable Electricity Generation, CO2 Emissions and Economic Growth: Evidence from Middle-Income Countries in Asia /Generación de electricidad renovable, las emisiones de CO2 y crecimiento económico: ," Estudios de Economía Aplicada, Estudios de Economía Aplicada, vol. 31, pages 217-244, Enero.
    3. Olugbenga A. Onafowora & Oluwole Owoye, 2015. "Structural Vector Auto Regression Analysis of the Dynamic Effects of Shocks in Renewable Electricity Generation on Economic Output and Carbon Dioxide Emissions: China, India and Japan," International Journal of Energy Economics and Policy, Econjournals, vol. 5(4), pages 1022-1032.
    4. Antonio Angelo Romano & Giuseppe Scandurra, 2011. "The Investments in Renewable Energy Sources: Do Low Carbon Economies Better Invest In Green Technologies?," International Journal of Energy Economics and Policy, Econjournals, vol. 1(4), pages 107-115.
    5. Deshan Li & Degang Yang, 2016. "Does Non-Fossil Energy Usage Lower CO 2 Emissions? Empirical Evidence from China," Sustainability, MDPI, Open Access Journal, vol. 8(9), pages 1-11, August.
    6. repec:ipg:wpaper:2014-455 is not listed on IDEAS
    7. Farhani, Sahbi & Shahbaz, Muhammad, 2014. "What role of renewable and non-renewable electricity consumption and output is needed to initially mitigate CO2 emissions in MENA region?," Renewable and Sustainable Energy Reviews, Elsevier, vol. 40(C), pages 80-90.
    8. repec:gam:jeners:v:10:y:2017:i:6:p:761-:d:100105 is not listed on IDEAS
    9. Balsalobre-Lorente, Daniel & Shahbaz, Muhammad & Roubaud, David & Farhani, Sahbi, 2018. "How economic growth, renewable electricity and natural resources contribute to CO2 emissions?," Energy Policy, Elsevier, vol. 113(C), pages 356-367.
    10. Scandurra, Giuseppe & Romano, Antonio Angelo, 2011. "The investments in renewable energy sources: do low carbon economies better invest in green technologies?," MPRA Paper 34216, University Library of Munich, Germany.

    More about this item

    Keywords

    Renewables; economic growth; CO2 emissions; SVAR;

    JEL classification:

    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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