Abstract
This chapter estimates the interrelationships between growth in Gross Domestic Product (GDP), carbon dioxide (CO2) emissions in interaction with the consumption of fossil fuel and renewable energy consumption in a global context. In such a system the variable of renewable energy production capacity is introduced. It is found that growth in this variable has a significant effect on the growth of renewable energy consumption. This is the case for instantaneous unilateral regressions as well as for a vector error regression model. For the latter model the finding is that renewable capacity reduces fossil fuel use in the long run, while it also reduces economic growth. This suggests a difficult trade-off between applying renewables capacity for CO2 reductions, while also trying to maintain economic growth.
The authors are associate professor at the Faculty of Economics and Business of the University of Groningen, energy analyst at the Groningen-based Energy Delta Institute, and assistant professor of the Faculty of Economics and Business of the University of Groningen, respectively.
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Notes
- 1.
While it is a fact that most of the CO2 emissions are not man-made, it is assumed that the equilibrium of CO2 generation and CO2 use may be disturbed if humanity adds the CO2 embedded in fossil fuels to the atmosphere.
- 2.
Economic growth may also have negative externalities not related to CO2 emissions, like the destruction of tropical forests and habitats, the extinction of species, and environmental pollution.
- 3.
The term “renewable energy” is preferred to “alternative energy”. Alternative energy sources have not been considered so previously. Historically the use of wood and other plant products was the major source of energy, and it is still an important source of energy in many developing countries. Later, wind energy and water power became important energy sources. It will be clear that these sources would then not be considered to be alternative sources. Only now, after the industrial revolution where the massive use of coal, gas and oil became the major sources of worldwide energy production, one may call them alternative energy uses, because they do not use the fossil fuels generated during the ages of the existence of the world. Nowadays, also solar energy, tide and wave based electricity and waste based sources of energy production are also included amongst the (alternative or) renewable sources.
- 4.
The World Bank database reports a large decline in renewable energy consumption in 1990. It is likely that this is caused by a different approach in measuring such consumption. After 1990 the gradual trend in renewable energy is visible again.
- 5.
Obviously there are many more determinants for the generation of renewable energy, like population growth, technological development, global politics on the availability of oil, local politics on the stimulation of renewable energy sources, and the availability of capital and of natural resources needed to generate capacity for renewable energy production. Here a simplification is made by equating the price of renewable energy to the price of fossil energy. Of course subsidies on renewable energy and CO2 emission costs may influence the price of non-fossil fuels, while also autonomous demand changes may have their impact. Furthermore, fuel switching other than from fossil fuel to renewable energy has been ignored. Finally, in the figure the impact of nuclear energy is discarded.
- 6.
The Data of the World Bank on CO2 emissions started in 1960, but ended in 2007. The value of CO2 emissions presented by BP started in 1965 and ended in 2009. During overlapping years the emissions reported by BP are on average 0.1 % larger than emissions recorded by the World Bank. Energy prices are measured by real oil prices in dollars per barrel against US 2009 prices (a series which goes back to 1861).
- 7.
The complement of the fossil fuel consumption percentage thus includes nuclear energy. For the combustible renewables and waste measured in kiloton oil equivalent there are no data available for 2007 and 2008. The data for these years is extended by using the percentage of these fuels in energy use for 2007 and 2008, also provided by the World Bank. Because the numbers presented are not fully consistent with the derivation of the same number from the percentages and energy use, the kiloton oil equivalent levels are used which are calculated from the percentages and the kiloton levels directly presented by the World Bank for 2006 to make the data for 2007 and 2008 consistent with the previous numbers.
- 8.
Corrections are made for leap years. This procedure implies that the electrical capacity is calculated based on the assumption that 1980 was a “normal” electrical production and electricity capacity year, that the relation between production and capacity is not cyclical before 1980 and that the development in production is capable of measuring the development in electrical capacity.
- 9.
This is caused by the fact that the use of each type of fossil fuels has its own standard global average CO2 emission consequences. Per TJ (terajoule = 1012 joules) coal emits 94,600 kg CO2, oil 73,300 kg CO2, and gas 56,100 kg CO2 (BP 2011).
- 10.
Use of panel models (as used for example by Mahadevan and Asufu-Adjaye (2007); Apergis and Payne (2009), and Sadorsky (2009)) is not considered for this analysis; also because equilibrium equations and reactions of the various variables may be very different for different countries, even if one includes panel intercepts.
- 11.
While Marquez and Fuinhas (2011) find a persistency in renewable energy consumption, such a positive relationship between the current and last year’s change in renewable energy consumption are not found. In the present model these effects are captured through renewable energy generation capacity.
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von Eije, H., von Eije, S., Westerman, W. (2013). Renewable Energy Production Capacity and Consumption, Economic Growth and Global Warming. In: Dorsman, A., Simpson, J., Westerman, W. (eds) Energy Economics and Financial Markets. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-30601-3_5
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