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A Comparative Analysis of the Relationship between Renewable Energy Production and Economic Growth

Year 2023, Volume: 11 Issue: 1, 1 - 16, 12.07.2023
https://doi.org/10.17093/alphanumeric.977654

Abstract

World relied heavily on non-renewable sources in energy production for a long time.
Although renewable energy investment is costly, especially for developing countries, the energy continuity provided by these sustainable sources can lower investment costs dramatically in the long run. Improvement of factors like economic growth and social welfare are believed to increase awareness of sustainable energy production. In this context, this paper examines the relationship between renewable energy production and the economic growth of Germany, France, which are low energy-dependent countries, and Turkey, which is heavily dependent on external sources in terms of energy. The paper uses annual data between 1970-2018. The stationarity of variables was tested with methods developed by Zivot and Andrews (1992), and Enders and Lee (2012). Cointegration analysis with structural breaks developed by Gregory and Hansen (1996) was used to evaluate the relationship between variables. The results from the regime shift model indicate that structural reforms caused a big regime shift in the relationship between energy production and economic growth in Germany and Turkey whereas the reforms did not lead to such a shift in France. The results of the causality analysis indicate a unidirectional causality from GDP to RN for Turkey and Germany.

References

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  • Akarca, A.T., Long, T.V., 1980. On the relationship between energy and GNP: a reexamination. Journal of Energy Development 5, 326–331
  • Apergis, N., & Payne, J. E. (2009). Energy consumption and economic growth in Central America: Evidence from a panel cointegration and error correction model. Energy Economics, 31(2), 211–216. doi: 10.1016/j.eneco.2008.09.002
  • Apergis, N., & Payne, J. E. (2010). Renewable energy consumption and economic growth: Evidence from a panel of OECD countries. Energy Policy, 38(1), 656–660. doi: 10.1016/j.enpol.2009.09.002
  • Bergman, L., Brunekreeft, G., Doyle, C., Von der Fehr, N. M., Newberry, D. M., Pollitt, M., & Regibeau, P. (1999). A European Market for Electricity? - Monitoring European Deregulation 2 (1282954140 946261666 R. Vaitilingham, Ed.). London: Swedish Center for Business and Policy Studies.
  • Bhattacharya, M., Paramati, S. R., Ozturk, I., & Bhattacharya, S. (2016). The effect of renewable energy consumption on economic growth: Evidence from top 38 countries. Applied Energy, 162, 733–741. doi: 10.1016/j.apenergy.2015.10.104
  • Chen, S.-T., Kuo, H.-I., & Chen, C.-C. (2007). The relationship between GDP and electricity consumption in 10 Asian countries. Energy Policy, 35(4), 2611–2621. doi: 10.1016/j.enpol.2006.10.001
  • Cheng, B., 1995. An investigation of cointegration and causality between energy consumption and economic growth. Journal of Energy Development 21, 73–84.
  • Cheng, B.S., 1997. Energy consumption and economic growth in Brazil, Mexico and Venezuela: a time series analysis. Applied Economics Letters 4 (11), 671–674.
  • Cheng, B.S., 1998. Energy consumption, employment and causality in Japan: a multivariate approach. Indian Economic Review 33 (1), 19–29.
  • Cheng, B.S., 1999. Causality between energy consumption and economic growth in India: An application of cointegration and error-correction modeling. Indian Economic Review 34, 39–49.
  • Cheng, B.S., Lai, T.W., 1997. An investigation of co-integration and causality between energy consumption and economic activity in Taiwan. Energy Economics 19 (4), 435–444.
  • Danish, Zhang, B., Wang, Z., & Wang, B. (2017). Energy production, economic growth and CO2 emission: evidence from Pakistan. Natural Hazards, 90(1), 27–50. doi:10.1007/s11069-017-3031-z
  • Destek, M. A., & Aslan, A. (2017). Renewable and non-renewable energy consumption and economic growth in emerging economies: Evidence from bootstrap panel causality. Renewable Energy, 111, 757–763. doi: 10.1016/j.renene.2017.05.008
  • Dinç, D. T., Gökmen, A., & Kanık, Z. B. (2017). Energy policy issues in Turkey: Renewable Energy Production and Economic Growth Nexus. International Journal of Sustainable Economies Management, 6(3), 50-65. doi:10.4018/ijsem.2017070105
  • Durlauf, S.N., Johnson, P.A., and Temple, J.R.W. (2005). Growth Econometrics (Chapter 8), Handbook of Economic Growth, Volume 1a, Edited by Philippe Aghion and Steven N. Durlauf, pp.652. DOI: 10.1016/S1574-0684(05)01008-7
  • EDF. (2021, February 09). EDF Group - History. Retrieved March 31, 2021, from https://www.edf.fr/en/the-edf-group/edf-at-a-glance/history
  • Enders, W., Jones, P. "Grain prices, oil prices, and multiple smooth breaks in a VAR." Studies in Nonlinear Dynamics & Econometrics 20.4 (2016): 399-419.
  • Enders, W., Lee, J. “The flexible Fourier form and Dickey–Fuller type unit root tests.", Economics Letters 117.1 (2012): 196-199.
  • Gregory, A.W., Hansen, Bruce E. "Practitioner’s corner: tests for cointegration in models with regime and trend shifts." Oxford bulletin of Economics and Statistics 58.3 (1996b): 555-560.
  • Gregory, Allan W., Hansen, Bruce E. "Residual-based tests for Cointegration in models regime shifts. " Journal of Econometrics 70 (1996a): 99-126.
  • Hake, J.-F., Fischer, W., Venghaus, S., & Weckenbrock, C. (2015). The German Energiewende – History and status quo. Energy, 92, 532–546. doi: 10.1016/j.energy.2015.04.027
  • Hepbasli A., & Ozgener O. (2004) Turkey's Renewable Energy Sources: Part 1. Historical Development, Energy Sources, 26:10, 961-969, DOI: 10.1080/00908310490473183
  • Irfan, U. (2015, June 29). France loses enthusiasm for nuclear power. Retrieved March 27, 2021, from https://www.scientificamerican.com/article/france-loses-enthusiasm-for-nuclear- power/
  • Karagöl, E.T., & Kavaz, İ. (2017). Dünyada ve Türkiye’de Yenilenebilir Enerji. Seta. https://setav.org/assets/uploads/2017/04/yenilenebilirenerji.pdf.
  • Kazar, G., & Kazar, A. (2014). The renewable energy production-economic development nexus. International Journal of Energy Economics and Policy, 4(2), 312.
  • Kraft, J., Kraft, A., 1978. On the relationship between energy and GNP. Journal of Energy and Development 3, 401–403. Kulözü, A. G. N. (2005). Yenilenebilir Enerji Politikalari: Fransa Örneği. III. Yenilenebilir Enerji Kaynakları Sempozyumu ve Sergisi, Kocaeli.
  • Lauber, V., & Mez, L. (2004). Three Decades of Renewable Electricity Policies in Germany. Energy & Environment, 15(4), 599–623. doi:10.1260/0958305042259792
  • Ntanos, S., Skordoulis, M., Kyriakopoulos, G., Arabatzis, G., Chalikias, M., Galatsidas, S., Batzios A., Katsarou, A. (2018). Renewable Energy and Economic Growth: Evidence from European Countries. Sustainability, 10(8), 2626. doi:10.3390/su10082626
  • OECD. (2002). Regulatory Reform in Electricity, Gas and Road Freight Transport. Organisation for Economic Co- operation and Development. https://www.oecd.org/turkey/1840779.pdf.
  • Özkaya, S. Y. (2004). Yenilenebilir Enerji Kaynakları. Uluslararası Ekonomik Sorunlar Dergisi, T.C. Dışişleri Bakanlığı Yayınları, Sayı XIV. http://www.mfa.gov.tr/yenilenebilir-enerji-kaynaklari.tr.mfa.
  • Ozturk, I. (2010). A literature survey on energy–growth nexus. Energy Policy, 38(1), 340–349. doi: 10.1016/j.enpol.2009.09.024
  • Patton, J. (n.d.). Energy sources: History, selection, and transitions. Retrieved March 27, 2021, from https://www.ag.ndsu.edu/archive/streeter/Energy_Report/Chapters/History.htm
  • Phillips, P.C.B., Hansen, Bruce E. "Statistical inference in instrumental variables regression with I (1) processes." The Review of Economic Studies 57.1 (1990): 99-125.
  • Rohwer, S. (2017, May 04). Energy in France: Nuclear and Renewable Power. Retrieved March 27,2021,from https://sites.stedwards.edu/pangaea/2017/05/04/1339
  • Sachs, J., Wyplosz, C., Buiter, W., Fels, G., & de Menil, G. (1986). The Economic Consequences of President Mitterrand. Economic Policy, 1(2), 261. doi:10.2307/1344559
  • Singh, N., Nyuur, R., & Richmond, B. (2019). Renewable Energy Development as a Driver of Economic Growth: Evidence from Multivariate Panel Data Analysis. Sustainability, 11(8), 2418. doi:10.3390/su11082418
  • Sørensen, B. (1991). A history of renewable energy technology. Energy Policy, 19(1), 8–12. doi:10.1016/0301- 4215(91)90072-v
  • Soytas, U., Sarı, R., Özdemir, O., 2001. Energy consumption and GDP relation in Turkey: a cointegration and vector error correction analysis. In: Economies and Business in Transition: Facilitating Competitiveness and Change in the Global Environment Proceedings. Global Business and Technology Association, pp. 838–844.
  • Squalli, J. (2007). Electricity consumption and economic growth: Bounds and causality analyses of OPEC members. Energy Economics, 29(6), 1192–1205. doi: 10.1016/j.eneco.2006.10.001
  • T.C. Avrupa Birliği Bakanlığı, 2014. Avrupa Birliği Sürecinde Enerj Faslı, ISBN:978-605-5197-24-7, https://www.ab.gov.tr/files/SEPB/yayinlarveraporlar/enerjikitap.pdf
  • Tara Patel, “France Spurs Efficiency, Renewables with $13.4 Billion Energy Plan,” Renewable Energy World, July 30, 2014, http://www.renewableenergyworld.com/news/2014/07/france-spurs-efficiency-renewables-with-13-4-billion-energy-plan.html.
  • Tiwari, A. K., Apergis, N., & Olayeni, O. R. (2014). Renewable and nonrenewable energy production and economic growth in sub-Saharan Africa: a hidden cointegration analysis. Applied Economics, 47(9), 861–882. doi:10.1080/00036846.2014.982855
  • Yu, E.S.H., Hwang, B.K., 1984. The relationship between energy and GNP: further results. Energy Economics 6, 186–190
  • Zafar, M. W., Shahbaz, M., Hou, F., & Sinha, A. (2018). From Nonrenewable to Renewable Energy and Its Impact on Economic Growth: The role of Research & Development Expenditures in Asia-Pacific Economic Cooperation Countries. Journal of Cleaner Production. doi: 10.1016/j.jclepro.2018.12.081
  • Zivot, E., Andrews, D. (1992). Further Evidence on The Great Crash, The Oil Price Shock, and The Unit Root Hypothesis. Journal of Business & Economic Statistics, vol. 10, no. 3, pp.251-270.
Year 2023, Volume: 11 Issue: 1, 1 - 16, 12.07.2023
https://doi.org/10.17093/alphanumeric.977654

Abstract

References

  • Advameg NE. (n.d.). France - economic development. Retrieved April 01, 2021, from https://www.nationsencyclopedia.com/Europe/France-ECONOMIC-DEVELOPMENT.html
  • Akarca, A.T., Long, T.V., 1980. On the relationship between energy and GNP: a reexamination. Journal of Energy Development 5, 326–331
  • Apergis, N., & Payne, J. E. (2009). Energy consumption and economic growth in Central America: Evidence from a panel cointegration and error correction model. Energy Economics, 31(2), 211–216. doi: 10.1016/j.eneco.2008.09.002
  • Apergis, N., & Payne, J. E. (2010). Renewable energy consumption and economic growth: Evidence from a panel of OECD countries. Energy Policy, 38(1), 656–660. doi: 10.1016/j.enpol.2009.09.002
  • Bergman, L., Brunekreeft, G., Doyle, C., Von der Fehr, N. M., Newberry, D. M., Pollitt, M., & Regibeau, P. (1999). A European Market for Electricity? - Monitoring European Deregulation 2 (1282954140 946261666 R. Vaitilingham, Ed.). London: Swedish Center for Business and Policy Studies.
  • Bhattacharya, M., Paramati, S. R., Ozturk, I., & Bhattacharya, S. (2016). The effect of renewable energy consumption on economic growth: Evidence from top 38 countries. Applied Energy, 162, 733–741. doi: 10.1016/j.apenergy.2015.10.104
  • Chen, S.-T., Kuo, H.-I., & Chen, C.-C. (2007). The relationship between GDP and electricity consumption in 10 Asian countries. Energy Policy, 35(4), 2611–2621. doi: 10.1016/j.enpol.2006.10.001
  • Cheng, B., 1995. An investigation of cointegration and causality between energy consumption and economic growth. Journal of Energy Development 21, 73–84.
  • Cheng, B.S., 1997. Energy consumption and economic growth in Brazil, Mexico and Venezuela: a time series analysis. Applied Economics Letters 4 (11), 671–674.
  • Cheng, B.S., 1998. Energy consumption, employment and causality in Japan: a multivariate approach. Indian Economic Review 33 (1), 19–29.
  • Cheng, B.S., 1999. Causality between energy consumption and economic growth in India: An application of cointegration and error-correction modeling. Indian Economic Review 34, 39–49.
  • Cheng, B.S., Lai, T.W., 1997. An investigation of co-integration and causality between energy consumption and economic activity in Taiwan. Energy Economics 19 (4), 435–444.
  • Danish, Zhang, B., Wang, Z., & Wang, B. (2017). Energy production, economic growth and CO2 emission: evidence from Pakistan. Natural Hazards, 90(1), 27–50. doi:10.1007/s11069-017-3031-z
  • Destek, M. A., & Aslan, A. (2017). Renewable and non-renewable energy consumption and economic growth in emerging economies: Evidence from bootstrap panel causality. Renewable Energy, 111, 757–763. doi: 10.1016/j.renene.2017.05.008
  • Dinç, D. T., Gökmen, A., & Kanık, Z. B. (2017). Energy policy issues in Turkey: Renewable Energy Production and Economic Growth Nexus. International Journal of Sustainable Economies Management, 6(3), 50-65. doi:10.4018/ijsem.2017070105
  • Durlauf, S.N., Johnson, P.A., and Temple, J.R.W. (2005). Growth Econometrics (Chapter 8), Handbook of Economic Growth, Volume 1a, Edited by Philippe Aghion and Steven N. Durlauf, pp.652. DOI: 10.1016/S1574-0684(05)01008-7
  • EDF. (2021, February 09). EDF Group - History. Retrieved March 31, 2021, from https://www.edf.fr/en/the-edf-group/edf-at-a-glance/history
  • Enders, W., Jones, P. "Grain prices, oil prices, and multiple smooth breaks in a VAR." Studies in Nonlinear Dynamics & Econometrics 20.4 (2016): 399-419.
  • Enders, W., Lee, J. “The flexible Fourier form and Dickey–Fuller type unit root tests.", Economics Letters 117.1 (2012): 196-199.
  • Gregory, A.W., Hansen, Bruce E. "Practitioner’s corner: tests for cointegration in models with regime and trend shifts." Oxford bulletin of Economics and Statistics 58.3 (1996b): 555-560.
  • Gregory, Allan W., Hansen, Bruce E. "Residual-based tests for Cointegration in models regime shifts. " Journal of Econometrics 70 (1996a): 99-126.
  • Hake, J.-F., Fischer, W., Venghaus, S., & Weckenbrock, C. (2015). The German Energiewende – History and status quo. Energy, 92, 532–546. doi: 10.1016/j.energy.2015.04.027
  • Hepbasli A., & Ozgener O. (2004) Turkey's Renewable Energy Sources: Part 1. Historical Development, Energy Sources, 26:10, 961-969, DOI: 10.1080/00908310490473183
  • Irfan, U. (2015, June 29). France loses enthusiasm for nuclear power. Retrieved March 27, 2021, from https://www.scientificamerican.com/article/france-loses-enthusiasm-for-nuclear- power/
  • Karagöl, E.T., & Kavaz, İ. (2017). Dünyada ve Türkiye’de Yenilenebilir Enerji. Seta. https://setav.org/assets/uploads/2017/04/yenilenebilirenerji.pdf.
  • Kazar, G., & Kazar, A. (2014). The renewable energy production-economic development nexus. International Journal of Energy Economics and Policy, 4(2), 312.
  • Kraft, J., Kraft, A., 1978. On the relationship between energy and GNP. Journal of Energy and Development 3, 401–403. Kulözü, A. G. N. (2005). Yenilenebilir Enerji Politikalari: Fransa Örneği. III. Yenilenebilir Enerji Kaynakları Sempozyumu ve Sergisi, Kocaeli.
  • Lauber, V., & Mez, L. (2004). Three Decades of Renewable Electricity Policies in Germany. Energy & Environment, 15(4), 599–623. doi:10.1260/0958305042259792
  • Ntanos, S., Skordoulis, M., Kyriakopoulos, G., Arabatzis, G., Chalikias, M., Galatsidas, S., Batzios A., Katsarou, A. (2018). Renewable Energy and Economic Growth: Evidence from European Countries. Sustainability, 10(8), 2626. doi:10.3390/su10082626
  • OECD. (2002). Regulatory Reform in Electricity, Gas and Road Freight Transport. Organisation for Economic Co- operation and Development. https://www.oecd.org/turkey/1840779.pdf.
  • Özkaya, S. Y. (2004). Yenilenebilir Enerji Kaynakları. Uluslararası Ekonomik Sorunlar Dergisi, T.C. Dışişleri Bakanlığı Yayınları, Sayı XIV. http://www.mfa.gov.tr/yenilenebilir-enerji-kaynaklari.tr.mfa.
  • Ozturk, I. (2010). A literature survey on energy–growth nexus. Energy Policy, 38(1), 340–349. doi: 10.1016/j.enpol.2009.09.024
  • Patton, J. (n.d.). Energy sources: History, selection, and transitions. Retrieved March 27, 2021, from https://www.ag.ndsu.edu/archive/streeter/Energy_Report/Chapters/History.htm
  • Phillips, P.C.B., Hansen, Bruce E. "Statistical inference in instrumental variables regression with I (1) processes." The Review of Economic Studies 57.1 (1990): 99-125.
  • Rohwer, S. (2017, May 04). Energy in France: Nuclear and Renewable Power. Retrieved March 27,2021,from https://sites.stedwards.edu/pangaea/2017/05/04/1339
  • Sachs, J., Wyplosz, C., Buiter, W., Fels, G., & de Menil, G. (1986). The Economic Consequences of President Mitterrand. Economic Policy, 1(2), 261. doi:10.2307/1344559
  • Singh, N., Nyuur, R., & Richmond, B. (2019). Renewable Energy Development as a Driver of Economic Growth: Evidence from Multivariate Panel Data Analysis. Sustainability, 11(8), 2418. doi:10.3390/su11082418
  • Sørensen, B. (1991). A history of renewable energy technology. Energy Policy, 19(1), 8–12. doi:10.1016/0301- 4215(91)90072-v
  • Soytas, U., Sarı, R., Özdemir, O., 2001. Energy consumption and GDP relation in Turkey: a cointegration and vector error correction analysis. In: Economies and Business in Transition: Facilitating Competitiveness and Change in the Global Environment Proceedings. Global Business and Technology Association, pp. 838–844.
  • Squalli, J. (2007). Electricity consumption and economic growth: Bounds and causality analyses of OPEC members. Energy Economics, 29(6), 1192–1205. doi: 10.1016/j.eneco.2006.10.001
  • T.C. Avrupa Birliği Bakanlığı, 2014. Avrupa Birliği Sürecinde Enerj Faslı, ISBN:978-605-5197-24-7, https://www.ab.gov.tr/files/SEPB/yayinlarveraporlar/enerjikitap.pdf
  • Tara Patel, “France Spurs Efficiency, Renewables with $13.4 Billion Energy Plan,” Renewable Energy World, July 30, 2014, http://www.renewableenergyworld.com/news/2014/07/france-spurs-efficiency-renewables-with-13-4-billion-energy-plan.html.
  • Tiwari, A. K., Apergis, N., & Olayeni, O. R. (2014). Renewable and nonrenewable energy production and economic growth in sub-Saharan Africa: a hidden cointegration analysis. Applied Economics, 47(9), 861–882. doi:10.1080/00036846.2014.982855
  • Yu, E.S.H., Hwang, B.K., 1984. The relationship between energy and GNP: further results. Energy Economics 6, 186–190
  • Zafar, M. W., Shahbaz, M., Hou, F., & Sinha, A. (2018). From Nonrenewable to Renewable Energy and Its Impact on Economic Growth: The role of Research & Development Expenditures in Asia-Pacific Economic Cooperation Countries. Journal of Cleaner Production. doi: 10.1016/j.jclepro.2018.12.081
  • Zivot, E., Andrews, D. (1992). Further Evidence on The Great Crash, The Oil Price Shock, and The Unit Root Hypothesis. Journal of Business & Economic Statistics, vol. 10, no. 3, pp.251-270.
There are 46 citations in total.

Details

Primary Language English
Subjects Operation
Journal Section Articles
Authors

Mehmet Uçaravcı 0000-0001-8453-762X

Tuğba Akın 0000-0002-1132-388X

Publication Date July 12, 2023
Submission Date August 2, 2021
Published in Issue Year 2023 Volume: 11 Issue: 1

Cite

APA Uçaravcı, M., & Akın, T. (2023). A Comparative Analysis of the Relationship between Renewable Energy Production and Economic Growth. Alphanumeric Journal, 11(1), 1-16. https://doi.org/10.17093/alphanumeric.977654

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