DOES RENEWABLE ENERGY SPUR ECONOMIC GROWTH IN KENYA? AN EMPIRICAL INVESTIGATION

Sheilla Nyasha; Nicholas Odhiambo

doi:10.7251/ACE2338009N

Authors

Sheilla Nyasha Department of Economics, University of South Africa, UNISA, Pretoria, South Africa
Nicholas M. Odhiambo Department of Economics, University of South Africa, UNISA, Pretoria, South Africa

DOI:

https://doi.org/10.7251/ACE2338009N

Keywords:

Kenya, renewable energy consumption, energy mix, economic growth

Abstract

In this paper, the dynamic impact of renewable energy consumption on economic growth in Kenya has been empirically examined during the period from 1990 to 2019, using the autoregressive distributed lag-bounds testing approach. The study was motivated by the call to increase renewable energy use in Kenya. Contrary to expectations, the results of the study show that renewable energy consumption has no significant impact on economic growth in Kenya, regardless of whether the analysis is in the long or short run. The study, thus, concludes that the development of the real sector in Kenya is not dependent on the exploration of renewable energy. This implies that Kenya can still pursue the necessary energy conservations policies without compromising its long-term growth trajectory.

References

Apergis, N., & Payne, J. E. (2010). Renewable energy consumption and growth in Eurasia, Energy Economics, 32, 1392-1397. https://doi.org/10.1016/j.eneco.2010.06.001.

Armeanu, D., Vintila, G., & Gherghina, S. (2017). Does renewable energy drive sustainable economic growth? Multivariate panel data evidence for EU-28 countries. Energies, 10(3), 381. http://dx.doi.org/10.3390/en10030381.

Bozkurt, C., & Destek, M. A. (2015). Renewable Energy and Sustainable Development Nexus in Selected OECD Countries. International Journal of Energy Economics and Policy, 5(2), 507-514.

Cetin, M. A. (2016). Renewable energy consumption-economic growth nexus in E-7 countries. Energy Sources, Part B: Economics, Planning, and Policy, 11(12), 1180-1185. https://doi.org/10.1080/15567249.2016.1156195

Charfeddine, L., & Kahia, M. (2019). Impact of renewable energy consumption and financial development on CO2 emissions and economic growth in the MENA region: A panel vector autoregressive (PVAR) analysis. Renewable Energy, 139, 198-213. https://doi.org/10.1016/j.renene.2019.01.010,

COBENEFITS. (2022). COBENEFITS. Kenya reports and briefings. https://www.cobenefits.info/country-studies-infographics/studies/kenya/ [Accessed 13 October 2022]

Dogan, E. (2016). Analyzing the linkage between renewable and non-renewable energy consumption and economic growth by considering structural break in time-series data. Renew Energy, 99, 1126-36. https://doi.org/10.1016/j.renene.2016.07.078

Haseeb, M., Abidin, I. S. Z., Hye, Q. M. A., & Hartani, N. H. (2019). The impact of renewable energy on the economic well-being of Malaysia: Fresh evidence from autoregressive distributed lag bound testing approach. International Journal of Energy Economics and Policy, 9(1), 269-275. https://doi.org/10.32479/ijeep.7229

Inglesi-Lotz, R. (2016). The impact of renewable energy consumption to economic growth: A panel data application. Energy Economics, 53, 58-63. https://doi.org/10.1016/j.eneco.2015.01.003,

Kamoun, M., Abdelkafi, I., & Ghorbel, A. (2019). The impact of renewable energy on sustainable growth: evidence from a panel of OECD countries. Journal of the Knowledge Economy, 10(1), 221-237. https://doi.org/10.1007/s13132-016-0440-2

Khobai, H., & Le Roux, P. (2017). Does renewable energy consumption drive economic growth: Evidence from granger-causality technique. International Journal of Energy Economics and Policy, 8(2), 205-212.

Lee, S., & Jung, Y. (2018). Causal dynamics between renewable energy consumption and economic growth in South Korea: Empirical analysis and policy implications. Energy and Environment, 29(7), 1298-1315. https://doi.org/10.1177/0958305X187765,

Mahjabeen, S., Shah, Z. A., Chughtai, S., & Simonetti, B. (2020). Renewable energy, institutional stability, environment and economic growth nexus of D-8 countries. Energy Strategy Reviews, 29, 100484. https://doi.org/10.1016/j.esr.2020.100484

Majeed, M. T., Anwar, A., & Luni, T. (2021). The Impact of Renewable and Non-Renewable Energy Consumption on Economic Growth: A Global Perspective with Developed and Developing Economies. Pakistan Journal of Commerce and Social Sciences, 15(2), 286-307.

Marinas, M., Dinu, M., Socol, A., & Socol, C. (2018). Renewable energy consumption and economic growth. Causality relationship in Central and Eastern European countries. Plos One, 13(10), e0202951. http://dx.doi.org/10.1371/journal.pone.0202951.

Marques A., & Fuinhas J. (2012). Is renewable energy effective in promoting growth? Energy Policy, 46, 434-42. http://dx.doi.org/10.1016/j.enpol.2012.04.006.

Nyasha, S., & Odhiambo, N. M. (2016). Financial systems and economic growth: Empirical evidence from Australia. Contemporary Economics, 10(2), 163-174. https://doi.org/10.5709/ce.1897-9254.207

Nyasha, S., & Odhiambo, N. M. (2019). Do financial systems spur economic growth in the USA? An empirical investigation. Panoeconomicus, 66(2), 165-185. https://doi.org/10.2298/PAN160517012N

Nyasha, S., & Odhiambo, N. M. (2020). Does remittance inflow granger-cause economic growth in South Africa? A dynamic multivariate causality test. Review of Black Political Economy, 47(1), 86-103. https://doi.org/10.1177/0034644619885348

Nyasha, S., Odhiambo, N.M., & Musakwa, M. T. (2022). Bank development and unemployment in Kenya: An empirical investigation. Managing Global Transition, 20(2), 85-107. https://doi.org/10.26493/1854-6935.20.85-107

Nyoni, B., & Phiri, A. (2018). Renewable energy-economic growth nexus in South Africa: Linear, nonlinear or non-existent? Munich Personal RePEc Archive (MPRA), MPRA Paper No. 89761. https://doi.org/10.32479/ijeep.7706

Ocal, O., & Aslan, A. (2013). Renewable energy consumption–economic growth nexus in Turkey. Renewable and Sustainable Energy Reviews, 28, 494-499.

Odhiambo, N. M. (2008). Financial depth, savings and economic growth in Kenya: A dynamic causal linkage. Economic Modelling, 25, 704–713. https://doi.org/10.1016/j.econmod.2007.10.009

Ozcan, B., & Ozturk, I. (2019). Renewable Energy Consumption-Economic Growth Nexus in Emerging Countries: A Bootstrap Panel Causality Test. Renewable and Sustainable Energy Reviews, 104, 30-37, https://doi.org/10.1016/j.rser.2019.01.020

Pesaran, M. H., & Shin, Y. (1999). An autoregressive distributed lag modelling approach to cointegration analysis. In S. Storm (Ed.), Econometrics and Economic Theory in the 20th Century: The Ragnar Frisch Centennial Symposium, chapter 11 (pp.1-31). Cambridge University Press. https://doi.org/10.1017/CCOL521633230.011

Pesaran, M., Shin, Y., & Smith, R. (2001). Bounds Testing Approaches to the Analysis of Level Relationships. Journal of Applied Econometrics, 16, 289-326. https://doi.org/10.1002/jae.616

Qudrat-Ullah, H., & Nevo, C. M. (2021). The impact of renewable energy consumption and environmental sustainability on economic growth in Africa. Energy Reports, 7, 3877-3886. https://doi.org/10.1016/j.egyr.2021.05.083

Rafindadi, A. A., & Ozturk, I. (2017). Impacts of renewable energy consumption on the German economic growth: Evidence from combined co-integration test. Renewable and Sustainable Energy Reviews, 75, 1130-1141. https://doi.org/10.1016/j.rser.2016.11.093

Silva, S., Soares, I., & Pinho. C. (2012). The impact of renewable energy sources on economic growth and CO2 emissions a SVAR approach. European Research Studies, 15, 133-144. https://doi.org/10.35808/ersj/374

Smolovic, J. C., Muhadinovic, M., Radonjic, M., & Duraskovic, J. (2020). How does renewable energy consumption affect economic growth in the traditional and new member states of the European Union? Energy Reports, 6, 505-513. https://doi.org/10.1016/j.egyr.2020.09.028,

Takase, M., Kipkoech, R., & Essandoh, P. K. (2021). A comprehensive review of energy scenario and sustainable energy in Kenya. Fuel Communications, 7, 1-13. https://doi.org/10.1016/j.jfueco.2021.100015

Tsaurai, K., & Ngcobo, L. (2020). Renewable energy consumption, education, and economic growth in Brazil, Russia, India, China, South Africa. International Journal of Energy Economics and Policy, 10(2), 26-34, https://doi.org/10.32479/ijeep.8497

United States Agency for International Development. (2022). Kenya: Economic growth and trade. https://www.usaid.gov/kenya/economic-growth-and-trade

Venkatraja, B. (2020). Does renewable energy affect economic growth? Evidence from panel data estimation of BRICS countries. International Journal of Sustainable Development and World Ecology, 27(2), 107-113. https://doi.org/10.1080/13504509.2019.1679274

World Bank. (2022a). Kenya’s Geothermal Investments Contribute to Green Energy Growth, Competitiveness and Shared Prosperity. https://www.worldbank.org/en/news/feature/2015/02/23/kenyas-geothermal-investments-contribute-to-green-energy-growth-competitiveness-and-shared-prosperity

World Bank. (2022b). World Bank Development Indicators. http://data.worldbank.org

Zrelli, M. H. (2017). Renewable energy, non-renewable energy, carbon dioxide emissions, and economic growth in selected Mediterranean countries. Environmental Economics and Policy Studies, 19(4), 691-709. https://doi.org/10.1007/s10018-016-0170-5.