Revisiting the Relation between Renewable Electricity and Economic Growth: A Renewable-Growth Hypothesis

Abstract

Global concern about the climate crisis has incited movements for switching to renewable electricity. Renewable electricity can contribute to economic growth as an input factor (electricity generation) and also as an industry (renewable manufacturing). We introduce a new hypothesis, the renewable-growth hypothesis, to investigate the role of the renewable manufacturing industry in the energy-growth nexus study. To test the hypothesis, we select a target country group using the market share of the renewable manufacturing industry and conduct the Granger causality test for solar photovoltaic and wind power. The autoregressive distributed lag bounds testing approach is applied for the causality test. The results show that renewable electricity Granger causes economic growth in target countries, which supports the renewable-growth hypothesis. However, the hypothesis did not hold in countries that export renewable power facilities more than they install them for domestic demand. We believe that the renewable-growth hypothesis would be secured soon if renewable electricity expands broadly over the world.