The impact of renewable energy consumption on inclusive growth: panel data analysis in 44 African countries

Abstract

Energy needs are growing in Africa. The continent is rich in renewable energy resources, and the majority of countries are willing to change their energy regime by moving to the development and increased use of renewable energy. Increasing the share of renewable energy in the total energy mix is one way to improve the quality of economic growth. However, although economic growth has improved in Africa, it has not necessarily translated into sustained poverty reduction and equitable sharing. It is therefore important that the benefits of modern and renewable energy are captured by all. In that perspective, this research aims to explore the potential impact of renewable energy consumption on inclusive growth in 44 African countries. To do this, a dynamic panel data model is estimated with the System Generalized Method of Moments for a period covering 1991–2015. Focusing on inclusive growth that increases the size of the economy and creates employment opportunities for different segments of society, the main finding of the study is that renewable energy consumption has a significant positive impact on inclusive growth in Africa, particularly in African countries experiencing low levels of inclusive growth. Thus, if African countries succeed in making the transition to renewable energy effective, then incredible gains in inclusive growth could be captured, especially in countries with low levels of inclusive growth.

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Fig. 1

Source: Author, based on WDI and SE4ALL database

Fig. 2

Source: Author, based on WDI database

Notes

  1. 1.

    See, for example, the solar park of Benban in Egypt which is one of the most important and complex energy projects under development on the continent. Once completed, it will be the largest solar installation in the world.

  2. 2.

    Goal 8: Promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all.

  3. 3.

    Index measuring income inequality: a value of 100 corresponds to high inequality, and a value of 0 corresponds to low inequality.

  4. 4.

    AUC: African Union Commission; OECD: Organization for Economic Co-operation and Development.

  5. 5.

    For more definition, See Ngepah (2017) who conducted a broad review of theories and evidence of inclusive growth from the perspective of African countries.

  6. 6.

    Endogeneity refers to the correlation between the independent variables and the error terms. It could arise in the following cases: the presence of the lagged dependent variable among the regressors, measurement error or omitted variables bias.

  7. 7.

    Here, Type 1 error refers to the risk of rejecting a true null hypothesis of non-significance of the estimated coefficients.

  8. 8.

    Based on our measure of inclusive growth, inclusive growth would be high in a country for greater values of GDP per person employed. Nevertheless, we recognized that this may not be without limitations.

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Acknowledgements

I am grateful to anonymous referees for their helpful comments and suggestions that contributed to significantly enhancing the final version of the paper. The usual disclaimer applies.

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Correspondence to Jeffrey Kouton.

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Appendices

Appendix 1

See Fig. 3.

Fig. 3
figure3

Source: International Renewable Energy Agency (IRENA)

Regional installed capacity trend (in Megawatts) of renewable energy from 2010 to 2018.

Appendix 2

See Fig. 4.

Fig. 4
figure4

Source: International Renewable Energy Agency (IRENA)

Installed capacity trend (in Megawatts) of renewable energy in Africa from 2010 to 2018.

Appendix 3

See Fig. 5.

Fig. 5
figure5

Source: International Renewable Energy Agency (IRENA)

Regional trend in electricity generation (in Gigawatt hours) from renewable energy sources from 2010 to 2017.

Appendix 4: Countries used in the study

Algeria, Angola, Benin, Botswana, Burkina Faso, Burundi, Cabo Verde, Cameroon, Central African Republic, Chad, Congo Dem. Rep., Congo Rep., Cote d’Ivoire, Djibouti, Egypt, Equatorial Guinea, Eritrea, Eswatini, Ethiopia, Gabon, Gambia, Ghana, Guinea, Guinea-Bissau, Kenya, Lesotho, Madagascar, Malawi, Mali, Mauritania, Mauritius, Morocco, Mozambique, Namibia, Rwanda, Senegal, Sierra Leone, South Africa, Sudan, Tanzania, Togo, Tunisia, Uganda, Zambia.

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Kouton, J. The impact of renewable energy consumption on inclusive growth: panel data analysis in 44 African countries. Econ Change Restruct 54, 145–170 (2021). https://doi.org/10.1007/s10644-020-09270-z

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Keywords

  • Africa
  • Inclusive growth
  • Renewable energy consumption

JEL Classification

  • J21
  • O13
  • Q43
  • C33