Can conventional energy be replaced by renewable energy without harming economic growth in non-oil-MENA? Evidence from Granger causality in VECM
| Pages | 159-168 |
| Date | 05 July 2019 |
| Published date | 05 July 2019 |
| DOI | https://doi.org/10.1108/WJEMSD-11-2018-0098 |
| Author | Badry Hechmy |
| Subject Matter | Strategy,Business ethics,Sustainability |
Can conventional energy be
replaced by renewable energy
without harming economic growth
in non-oil-MENA? Evidence from
Granger causality in VECM
Badry Hechmy
Faculty of Economic Sciences and Management of Tunis,
University of Tunis el Manar, Tunis, Tunisia
Abstract
Purpose –The purpose of this paper is to examine the relationship between renewable energy consumption
and economic growth in non-oil countries in the Middle East and North Africa (non-oil-MENA) during the
period from 2000 to 2014. The Pedroni (2000) test shows that there is a long-term cointegration relationship
between those variables; however, the Granger causality test in the vector error correction model (VECM)
shows that this relationship is bidirectional in the short and long term. Thus, to ensure sustainable economic
growth without pollution and to reduce dependence on abroad, renewable energies can be chosen as
substitutes for conventional energies in the non-oil-MENA countries.
Design/methodology/approach –First, LLC and IPS unit root tests are used to test the variables
stationarity; and, second, Pedroni panel cointegration and Engle–Granger causality by VECM analysis are
used to check the relationship between the studied variables.
Findings –Empirical results show that the renewable energy consumption and economic growth are
cointegrated and that there are two-way causal relationships between them in the long and in the short term.
These countries must therefore encourage the consumption of renewable energy instead of traditional energy
to reduce their dependence on energy from abroad and CO
2
pollution.
Originality/value –The originality of this work lies in the measurements of the study variables and the
empirical investigation methods used.
Keywords Economic growth, Renewable energy, VECM, Causality test, Cointegration test, Non-oil-MENA
Paper type Research paper
1. Introduction
The Middle East and North Africa region (MENA) has about 57 percent of the world’soil
reserves and 41 percent of the natural gas reserves. According to the World Bank, energy
consumption is growing in this region between 3 and 8 percent per year, and the demand
for electricity alone is expected to increase by 84 percent in 2020 compared to 2010. The
total volume of greenhouse gas emissions is relatively low compared to other countries
and 74 percent of these emissions come mainly from oil-producing countries, but the
region is ranked the third in the world in terms of carbon emissions growth, which
exacerbate the ri sk of climate chang e.
However, despite the fact that there are large disparities between the countries of the
region in terms of oil wealth, they have a large endowment of renewable energy sources,
including solar and wind energy. The solar energy potential of MENA countries is among
the best in the world and the measurement of direct normal radiation varies between
2,050 and 2,800 KWh/m
2
/year (Swiss Arab Entrepreneurs Platform, 2017). The potential of
large-scale wind energy is concentrated mainly in the Atlantic and Red Sea coasts
(Morocco, Oman and Mauritania), where the wind speed frequently exceeds the 6.9 m/s
World Journal of
Entrepreneurship, Management
and Sustainable Development
Vol. 15 No. 2, 2019
pp. 159-168
© Emerald PublishingLimited
2042-5961
DOI10.1108/WJEMSD-11-2018-0098
Received 7 November 2018
Accepted 25 December 2018
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/2042-5961.htm
JEL Classification —C33, C23, Q43
159
Economic
growth in
non-oil-MENA
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