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Renewable energy consumption and economic growth: New evidence from Ghana - ScienceDirect
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## Article preview

- [Abstract](#preview-section-abstract)
- [Introduction](#preview-section-introduction)
- [Section snippets](#preview-section-snippets)
- [References (105)](#preview-section-references)
- [Cited by (151)](#preview-section-cited-by)

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## [Energy](/journal/energy "Go to Energy on ScienceDirect")

[Volume 248](/journal/energy/vol/248/suppl/C "Go to table of contents for this volume/issue"), 1 June 2022, 123559

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# Renewable energy consumption and economic growth: New evidence from Ghana

Author links open overlay panelJusticeGyimaha, XilongYaoa, Mark AweTachegaa, IsaacSam Hayforda, EvansOpoku-Mensahb

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## Highlights

- •
Renewable energy and economic growth in Ghana.

- •
Renewable energy has a total indirect and direct impact on economic growth in Ghana.

- •
Gross capital formation as a moderator has direct impact on economic growth in Ghana.

- •
Renewable energy cause foreign direct investment in Ghana.

- •
Economic growth cause renewable energy consumption in Ghana.


## Abstract

Whenever there is a question of [environmental quality](/topics/economics-econometrics-and-finance/environmental-valuation "Learn more about environmental quality from ScienceDirect's AI-generated Topic Pages") and economic prosperity, [renewable energy consumption](/topics/economics-econometrics-and-finance/renewable-energy-consumption "Learn more about renewable energy consumption from ScienceDirect's AI-generated Topic Pages") leads the debate. Ghana is a country blessed with a lot of [renewable energy resources](/topics/social-sciences/renewable-energy-resource "Learn more about renewable energy resources from ScienceDirect's AI-generated Topic Pages"). However, Ghana depends on non-renewable energy to fuel its economy. This study investigates the direct impact and indirect impact of renewable energy on economic growth using both the [Granger causality](/topics/economics-econometrics-and-finance/causality-analysis "Learn more about Granger causality from ScienceDirect's AI-generated Topic Pages") and the mediation model in its analysis based on data from 1990 to 2015. The variables used for this research are renewable energy, the gross domestic product, [foreign direct investment](/topics/earth-and-planetary-sciences/foreign-direct-investment "Learn more about foreign direct investment from ScienceDirect's AI-generated Topic Pages"), gross capital formation, and trade. The outcome shows a feedback effect among economic growth and renewable energy consumption, but renewable energy consumption does not have a significant indirect impact on economic growth. Renewable energy has a significant total impact on economic growth. Therefore, the increase in renewable energy consumption has a total positive effect on economic growth. The empirical results of our study suggest that, the use of renewable energy should be encouraged to promote economic growth.

## Introduction

Tracing from the period of the industrial revolution, non-renewable energy has been the dominant energy use for production. Non-renewable energy still remains the most used energy resource in recent times. It provides more than 87% of the global used primary energy \[1\]. The over-dependency on non-renewable energy has generated high emissions of CO2 and has resulted in global warming \[2,3\]. Renewable energy, unlike non-renewable energy like wind, biomass, hydro-power, solar, does not produce CO2 during production processes \[4\]. Globally, non-renewable energy combustion is considered as the highest emission of greenhouse gases (GHGs) \[5\]. There has been a global debate on the rate at which energy consumption is on the rise, its environmental consequences, and the desire for alternative energy in both the southern and northern worlds \[6\]. However, undermining non-renewable energy from the economic growth equation brings about the question of continuity and prosperity on board. Renewable energy is the best substitute for non-renewable energy since it has the potential of reducing carbon emission, but it can reduce productivity and negatively affects the economy when not used properly \[4\].

The 1970s double energy crisis, which retarded economic growth due to high energy prices, caused states to implement energy policies. Nevertheless, a reduction in energy usage would affect production, productivity and economic growth. Establishing the implications of energy consumption, its effect on the economic growth has gained much attention over the decades because of its tremendous policy implications. Nevertheless, renewable energy resources, which are common and abundant in many countries, remain unused \[7,8\]. According to International Renewable Energy Agency (IRENA) 2015 report, Ghana achieved an annual average gross domestic product (GDP) of 5% growth rate \[9\]; therefore, it is important to investigate the implications of renewable energy resources on her economic growth. Aside the economic importance of renewable energy, it further helps mitigate carbon emissions to promote environmental quality \[10\]. Over past years, Ghana is devoted to Millennium Development Goals number 7, which is sustainable development. However, efforts to achieve this goal are not of high performance despite a quite reduction of GHGs emissions in Ghana \[11\]. Fig. 1 gives a graphical representation of all the variables.

Furthermore, it is of great importance to analyze the indirect implications of renewable energy on economic growth. Most of the existing literature mostly focuses on establishing only the direct impact of energy, forgoing the indirect position of energy on economic growth. Undoubtedly, these findings would be relevant to policymakers whenever they make renewable energy policies. Many scholars have researched and contributed to the debate in relation to energy consumption and economic growth \[2,7,\[12\], \[13\], \[14\], \[15\]\]. However, these results only assessed the direct relationship between the two variables (energy usage and the economic growth) ignoring the indirect impact. Nevertheless, the global transition is considered a big agenda that provides enough opportunities and also as a challenge to economic growth \[16,17\]; therefore, its indirect effect is essential to assess the future of the economic growth. The study investigated the indirect effect and the direct effect of the two variables (renewable energy and economic growth). The study used a mediation model to establish the indirect effect and Granger causality to establish a direct effect among the variables (renewable energy consumption and economic growth).

Fossil fuel facilitates and improves productivity, but its contribution to carbon emission has been a global problem. Fossil fuel contribution to many countries' economies over a very long time cannot be underrated \[18\]. Fossil fuel has been a primary source of energy, fueling many economies globally. However, fossil fuel contribution to carbon emissions has brought the issue of finding the best alternative to replace it. The quest to find suitable energy that would provide a stable economic growth and maintain the environment's quality has become a challenge to many states \[19\]. Many developing nations rely on fossil energy to fuel their economy; therefore, the transition seems as a big challenge to these nations since it would cost their economy \[20\]. For instance, there was an increase in average consumption of natural gas from 107.9 billion cubic feet to about 327 billion cubic feet and 759.5 billion cubic feet in 1980, 2000, and 2005 respectively in Nigeria, Algeria, Egypt, Angola, and Gabon. In addition, in these same countries, the average consumption of petroleum raised from 116.4 thousand barrels per day, 213.2 thousand barrels per day, and 339.2 thousand barrels per day to about 191% and 59% for 1980 and 2000 values respectively \[19\]. This represents how much developing countries badly depend on fossil fuel for their economic growth.

Human day to day activities cannot be completed without the presence of energy. In respect to these human activities, there is always the release of carbon dioxide and other related greenhouse gases into the atmosphere \[3,21\]. These released gases from human activities pollute the atmosphere, which leads to global warming. This happens because the energy use, which is fossil fuel, has a vital role in carbon emissions. To tackle carbon emissions and its complications, there should be an availability of clean energy, affordable energy and reliable energy to replace the fossil fuel. The advantage of renewable energy has been appreciated globally due to its positive impact on the environment and combating carbon emissions. The need for renewable energy is to replace fossil fuel and promote environmental quality, reduce the rate of carbon emissions, combat global warming, and improve environmental security \[\[22\], \[23\], \[24\], \[25\]\].

Research conducted on 46 Sub-Sahara African countries from the year 1980–2015 indicated that renewable energy does not contribute to carbon emissions \[26\]. Another research on 19 developed and developing countries with a study period from 1984 to 2007 indicated that renewable energy does not cause carbon emissions \[27\]. These works appreciate the role of renewable energy in combating carbon emissions. Other researchers believe renewable energy contributes to carbon emissions either in the long-run or short-run \[28,29\]. A study conducted in 2019 on 28 Sub-Sahara Africa countries from the year 1980–2014 indicated the contribution of renewable energy to carbon emissions in a long-run \[30\] and another study on 12 Sub-Sahara Africa countries from the year 1971–2010 indicated there is a long-run effect from renewable energy to carbon emissions \[31\].

Manufacturing industries have realized the need to create a more sustainable environment within the system they operate, and this realization has encouraged the transition to a ‘greener’ approach \[11\]. Industries foresee the renewable energy transition as one of the best moves and the greatest mechanism to win over the negative effects of non-renewable energy on the environment and the vital position renewable energy has in the transition with respect to environmental quality \[32\]. The industries have come to appreciate that energy consumption is the foundation and the pillar of economic growth \[34\] and renewable energy is the best remedy to the energy crisis Ghana is facing, and the basis for modern industrialization \[35\] and the transition for renewable energy is the only way to achieve economic sustainability. The most promising opportunity to achieve economic growth in a country's rural areas or most less privileged towns is energy transition \[36\]. The campaign of the transition to cleaner energy would not just protect the ecosystem (environment), but will further increase job opportunities and income \[33\].

Obviously, all countries depending on non-renewable energy to fuel their production are considered not sustainable. This phenomenon exposes the relevance of renewable energy by empowering energy continuity, providing enough grounds for understanding, accepting, and appreciating renewable energy's influencing factors \[37\]. The transition for renewable energy is the only way for Sub-Sahara Africa, precisely West Africa, to have a sustainable economic growth and social development, and cleaner energy \[4\]. All the economic activities involved in industrial production are fueled by energy with the goal of providing fundamental social services. Ghana's economic stability cannot stand without a vital role play by energy. It does not only has an influence on the GDP but fuels vital economic sectors like transportation, education, tourism, food security, agriculture, regional development, and employment. Therefore, since energy is the pillar of Ghana's economic growth, double efforts should be made to enhance energy efficiency by using current technologies, investing more in the technological process, and renewable energy to lower high dependency on non-renewable energy \[7\]. The call for technological learning is expected to play an influential role in the battle to break the barriers associated to renewable energy usage to promote renewable energy usage, lessen the cost involved, and promoting investment \[38\]. We must also consider the working force, train the working force, provide the necessary funds, improve infrastructures, enrich our educational system, learning and innovation, and creativity should be of value \[39\].

Based on the knowledge we have gotten from reviewing previous studies, the studies on establishing the correlational relationship between renewable energy and economic growth have been done in various countries, however, establishing the intermediate roles play by some of these variables has not been done. In this respect, the authors have tried to add to the previous study by analyzing the intermediate role (indirect role) play by each of the variables used for the study as well as analyzing their direct effect. The main focus of the study is to analyze if the presence of foreign direct investors in Ghana is adding value to their fight to improve both the economic growth and renewable energy use. There has been a recent increase in renewable energy expansion projects in Ghana and the study seeks to appreciate if foreign direct investors have played an intermediate role.

This study establishes the indirect and direct relationship between the two variables (renewable energy and economic growth) and adds to the existing studies in three ways. Firstly, over the past decades, there have been a global concern about combating carbon emission worldwide. Though it is a global concern, it can be tackled from a country base since the emission is done on a country basis. Each country has to know their role to play in combating the emission. Therefore, it is very necessary to assess the impact of the emissions and its reduction on a country base \[40\]. Hence, this study considers only one country Ghana and uses the mediation model to assess the variables' indirect effect on her economic growth. Secondly, the commonly used methods that explain this type of study are mainly Cobb-Douglas production function in the form of the natural logarithm, Granger causality, and AFD test \[13,15\], but this study combines both the Granger causality test and the mediation model to assess the direct and indirect impact of the two variables. Third, there are few existing literature on energy and economic growth when Ghana is concerned; therefore, this paper would add up to the few existing literature to provide enough evidence to the already available literature.

The rest of this paper is structured as follows: literature review in section 2, section 3 explains the method use and the variables, results, and discussion in section 4 and section 5 presents the conclusion and the policy implications of the study.

## Section snippets

## Empirical background

Energy consumption is considered as the backbone for economic growth. According to Alsaleh and Abdul-Rahim 2018 \[41\], upgrading the use of sustainable energy (renewable energy) would result in better modernization of energy industry adding to the development of different nation's ambition for energy improvement aside the impact on economic growth. A study to investigate the growth hypothesis within the setting of conventional Cobb–Douglas production theory from 1990 to 2013 in the EU-28 region,

## Theoretical background

In respect to hypothetical growth point, in order to establish the correlation between energy use and economic growth, an autoregressive distributed lag approach and Granger causality test were employed by the previous studies \[42\]. Seyedeh et al. \[43\] in order to establish the impact of renewable energy on economic growth in Iran from 1990 to 2014 employed ARDL approach. Another previous study on Algeria used ARDL approach to analyze the influences of renewable energy on economic growth from

## Stationary test

The result in Table 4 shows the augmented dickey-fuller (ADF) test, which checks the stationary of the variables. The result indicates that the variables are not stationary (has unit root) at levels and the variables are stationary (no unit root) at the first difference. All the variables produced the same results lnrec at ‘c' (no trend and constant) where the null hypothesis is to be rejected and Δlnrec at ‘c' (no trend and constant) where the null hypothesis is accepted than the opposite for

## Conclusion

This study uses the mediation model and the Granger test to test for the direct and indirect impact of renewable energy usage on economic growth in Ghana. We employed renewable energy as the independent variable; foreign direct investment, trade, and gross capital formation as moderators, and the dependent variable is gross domestic product. The data used was collected from world development indicators from the period of 1990–2015. The Granger causality test results show that renewable energy

## Credit author statement

Justice Gyimah and Xilong Yao conducted the study, the methodology and wrote the first draft of the manuscript, Mark Awe Tachega contributed to the data interpretation and approved the final version of the work, and Sam Hayford Isaac and Evans Opoku-Mensah revised the manuscript. All the authors have read and consented to the published version of the manuscript.

## Declaration of competing interest

The authors declare that they have no known competing financial interests or personal relationships that could have appeared to influence the work reported in this paper.

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2024, Heliyon



Show abstract







In considering today's energy challenges, the link between the usage of renewable and non-renewable energy sources and economic growth has gained substantial policy attention. This research examines the complex relationship between these three variables to understand how non-renewable energy consumption and renewable energy consumption interact and what that means for economic growth. This study uses the Granger causality approach to explore the relationships between non-renewable energy consumption, renewable energy consumption, and economic development. It draws on a comprehensive dataset from the Word Bank database, including 152 nations from 1990 to 2019. The analysis is further disaggregated by four subgroups of countries; least developed, developed, transitional economies and developing countries. The result of this study provides valuable empirical evidence of uni-directional causality running from renewable energy consumption to economic growth and non-renewable energy consumption to economic growth in transitional economies. Furthermore, policymakers should focus on both variables when making decisions because the results show that energy consumption and economic growth are interconnected. Implementing global energy efficiency standards, reducing fossil fuel usage, and adopting regulatory measures are all viable policies for limiting adverse effects on the environment while encouraging economic development.

- ### [How central is renewable energy in economic systems?](/science/article/pii/S095965262402794X)



2024, Journal of Cleaner Production



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Renewable energy has demonstrated a significantly greater increase in its share of total energy consumption than carbon emissions in recent decades. This rise in renewable energy consumption did not effectively mitigate climate change, as evidenced by the accelerated rate of climate change. This paper aims to determine the cause of this failure by examining the total effect centrality and mediating effects of renewable energy in economic systems in the short run and long run. The total effect centrality and mediating effects of renewable energy illustrate the evolution of its overall impact on the major variables of an economic system and its role in mediating the indirect effects of these variables on carbon emissions, respectively. The study employs a recently developed network analysis that is a pioneer in the estimation of the time-varying total effect centrality and time-varying mediating effects of renewable energy, while also accounting for its cross-associations among all variables in a network. The study derives three conclusions by examining the three countries with the highest carbon emissions in their respective regions: the United States in North America, China in Asia, and Germany in Europe. First, renewable energy has become an essential element of economic systems, having a substantial total effect centrality on macroeconomic systems and, by way of its mediating effects, substantially mitigating the indirect effects of major macroeconomic variables on carbon emissions in the short run. Second, the total effect centrality and mediating effects of renewable energy diminish in the long run, indicating that its capacity to effectively mitigate climate change remains constrained in structural terms. Third, the long-term decline in total effect centrality rises by 0.3, 0.7, and 0.4 for the United States, Germany, and China, respectively. In the same nations, the long-term decline of mediating effects rises by 0.2, 0.4, and 0.2, respectively. The study provides pertinent policy recommendations on how to augment the total effect centrality and mediating effects of renewable energy in economic systems.

- ### [Analysis of thermal-hydraulic comprehensive performance of composite corrugated tubes composed of simple droplet-shaped corrugations](/science/article/pii/S1290072924002291)



2024, International Journal of Thermal Sciences



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Corrugation parameter design seeks to maximize the thermal-hydraulic comprehensive performance ( _THCP_) of corrugated tubes as much as possible. Among them, composite corrugations composed of simple corrugations are proposed to strengthen the _THCP_ of corrugated pipes. However, the rule and mechanism regarding the impact of composite corrugations on the _THCP_ of corrugated tubes, particularly when those composite corrugations are composed of simple asymmetric corrugations, are not well understood. Therefore, in this work, the effect of composite corrugations consisting of two simple droplet-shaped corrugations on _THCP_ is assessed numerically, where the first composite corrugation is concave-convex ( _CTCC1_) and the second composite corrugation is concave-concave ( _CTCC2_). In addition, the effect of traditional corrugation ( _CTSC_) on _THCP_ is also examined to further highlight the advantages of composite corrugation in enhancing the _THCP_ of corrugated tubes. The results of the study indicated a 49 %, 55 %, and 61 % increase in _THCP_ at a Reynolds number ( _Re_) of 5000 for _CTSC_, _CTCC1_, and _CTCC2_, respectively, compared to a smooth tube, indicating that the combination of composite corrugations in _CTCC2_ is superior to that in _CTCC1_. In addition, a smaller corrugation width on the upstream side of _CTCC2_ is more conducive to enhancing _THCP_. Furthermore, it should be ensured that the corrugation depth on the upstream side of _CTCC2_ is not greater than the depth on the downstream side to achieve better _THCP_. The work confirms the advantages of composite corrugations over traditional corrugations in enhancing _THCP_ and guides the selection of composite corrugation combination forms and the design of composite corrugation width and depth distribution.

- ### [The efficiency of natural resources in research and development: Developed economies’ mineral resources perspective](/science/article/pii/S0301420724005178)



2024, Resources Policy



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In the context of sustainable development, economies are struggling to attain economic development and environmental sustainability. Emerging economies are mostly dependent on natural resource extraction to expand their economic sector while ignoring the environmental cost incurred by the use of nonrenewable energy sources. However, few determinants of renewable energy use have been explored in the literature. Nevertheless, a comprehensive analysis of renewable energy factors while considering the role of natural resources is of paramount importance. The present research explores the nexus of economic development, carbon emissions, research and development, and natural resources with renewable energy in emerging economies between 1989 and 2021. Using novel nonparametric estimation methodologies, this study revealed cointegration between the mentioned variables. Based on the nonlinearity of information, this research employs the moment's quantile regression and asserts that economic expansion is the sole important factor influencing renewable energy use. However, focusing on increased (quadratic) economic growth, natural resource exploitation, carbon emissions, and R&D for economic expansion dramatically diminishes the amount of renewable energy usage. Based on the empirical findings, this report recommends efficient natural resource management, carbon neutrality, and increasing investment in renewable energy-related R&D.


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