Econometrics of Green Energy Handbook

This paper proposes an empirical model for exploring the effect of foreign direct investment, income, renewable and non-renewable energy consumption, and oil price on carbon emissions in net exporting countries (NECs) and net importing countries (NICs) for the period of 1991–2015. Following the conceptual framework of environmental Kuznets curve (EKC) hypothesis and empirical IPAT framework, the analysis has been carried out. The empirical results indicate that foreign direct investment, income, and renewable energy consumption have an N-shaped association with carbon emissions. On contrary, the impact of non-renewable energy consumption on carbon emissions is positive and the impact of oil price on carbon emissions is negative. Moreover, the empirical evidence recommends long-run policies in connection with the promotion of clean technologies, less dependence on natural resources, and advancement in environmental awareness and incentives for replacing old polluting technologies.

This paper observes the possible co-movements of oil price and CO₂ emissions in China by following wavelet coherence and wavelet partial coherence analyses to be able to depict the short-run and long-run co-movements at both low and high frequencies. To this end, this research might provide the current literature with the output of potential short-run and long-run structural changes in CO₂ emissions upon a shock (a change) in oil prices in China together with the control variables of world oil prices, fossil energy consumption and renewable consumption and urban population in China. Therefore, this research aims at determining wavelet coherencies between the variables and phase differences to exhibit the leading variable in potential co-movements. By following the time domain and frequency domain analyses of this research, one may claim that the oil prices in China have considerable negative impact on CO₂ emissions at high frequencies for the periods 1960–2014 and 1971–2014 in China. Besides, one may underline as well other important output of the research exploring that the urban population and CO₂ emissions have positive associations, move together for the period 1960–2014 in China. Eventually, this paper might suggest that authorities follow demand-side management policies considering energy demand behavior at both shorter cycles and longer cycles to diminish the CO₂ emissions in China.

This chapter aims at analyzing the effects of information and communications technology (ICT) on air pollution level of low-income country panel over the period 1995–2015. In order to achieve this, the second-generation panel data models allowing for cross-sectional dependence have been employed. The long-run estimation results indicate that percentage of Internet users, a proxy for ICTs, leads to an increase in carbon dioxide (CO₂) emission level in low-income countries. Besides, among the control variables of the model, income and energy consumption appear to increase to CO₂ emission level while financial development and trade openness do not have any significant effects on air quality level of low-income country panel. Based on these results, a number of policy implications could be suggested. For instance, investments into the ICT sector should be encouraged by both government and private sector via subsidies and grants.

This chapter searches for optimal models for forecasting the Wilder Hill Clean Energy Index (ECO), the Standard and Poor’s Global Clean Energy Index (SPCLE), the MAC Global Solar Energy Index (SUN), and the European Renewable Energy Index (EURIX). These indices measure the stock market performance of renewable energy companies. We employ fat-tailed distributed models, and we analyze their in-sample and out-of-sample performance for the returns and the 1%-Value-at-Risk (VaR) of renewable energy indices. Heavy-tailed distributed GARCH and GAS are optimal for all renewable energy returns. They also have the lowest out-of-sample mean-squared error and the best coverage for 1%-VaR of renewable energy returns. These findings highlight the relevance of modeling the kurtosis for renewable energy returns, and they are relevant for policymakers and investors who invest in the renewable energy sector.

This study evaluates the relationship between electric power consumption and urbanization comparing the econometric results of autoregressive distributed lag (ARDL) and vector autoregressive (VAR) for the period 1960–2015. Granger causality is also applied to the Portuguese economy. In this study, we use some hypotheses that describe the link between electric power consumption, urban population, carbon dioxide emissions, and economic growth. The motivation of this research focuses on the relationship between electric power consumption (energy consumption) and urban population, supported by the theoretical and empirical contributions of energy and urban economics. The empirical results show that electric power consumption presents a causality with economic growth, urban population, carbon dioxide emissions, and international trade. This research also proves that there is cointegration between all variables in the long run. This paper presents significant contributions to economic policy, showing that there exists an association between energy consumption and economic growth.

This chapter aims to examine the job creation effect of green energy sector developments in 18 OECD countries. For this purpose, the unemployment rates of observed countries are described as a function of economic growth, capital accumulation, government activities and green energy consumption, and constructed empirical model is analyzed with panel data methodologies for the period from 1990 to 2015. The results of empirical analysis show that economic growth and capital accumulation contribute to employment level for the panel of OECD countries, while increasing green energy usage and government activities are not efficient on employment. However, country-specific estimation results reveal that green energy consumption reduces unemployment rate in Canada, France, Israel, Mexico and New Zealand.

The study had three overarching objectives. The first aim of the study was to comprehensively review the role that a firm’s human capital played in promoting energy efficiency and green energy. Second aim was to review the role of technological innovation in the relationship between a firm’s human capital and energy consumption (green and non-green). Third aim was to provide any empirical evidence on the relationship between human capital and energy consumption keeping technological innovation as moderator. After reviewing the literature, we developed two equations to examine the quadratic relationship between HC and energy consumption by taking technological innovation as a moderating variable. Pakistan’s manufacturing sector was taken as a case, and data from 635 manufacturing firms were used for analysis. The study employed the panel feasible generalized square approach for the analysis. The results confirmed the existence of EKC-type inverted U-shape relationship between HC and non-green energy and an inverted U-shape curve in the relationship of HC and green energy consumption. Our results concurred broadly with the other studies conducted on the HC-energy consumption dyad. Our findings imply that industries with a higher level of HC and technology innovation can quickly substitute non-green energy with green energy consumption.

Green energy is the significant system of renewable energy that represents the sustainability dominion of energy. It comes under government limelight and is a convincing agenda to establish green economy structures and energy systems. Literature suggested industrial models for green and sustainable energy, using technological support and innovation for energy evolutions through extensive sustainable energy programs. Green and sustainable energy is efficient and demands least energy incorporation and decreasing disparities and impacts progressively towards green energy. Efficient energy usage establishes correspondent welfare for energy usage and the environment. Climate concerned regulation and green innovativeness focus on the regulations and the usage of renewable energy sources. Moreover, FDI boosts green energy and green innovation while condensed the usage of fossil energy in developed and developing countries. Moreover, countries need focus on energy bases; hence, they can divert towards green energy and ascents business towards green energy, while accepting the determining factors of energy strains and usage of clean or green energy, since it is vital for establishing improved energy guidelines for future. Continuous efforts are required to focus on modern green bases of energy to prevent harmful and damaging influence of conventional energy usage and energy production. Researches showed significant association between energy usage, industries production and economies progression. However, the growth of green energy bases provides a significant resolution to deal with concerns like energy safety and environmental variations. Where, the steady substituting of conventional energy means with green energy upholds the efforts on sustainability and climate protection since green energy usage shows a significant positioning in backing economies development and progression for many countries.

The current study contributes to the current debate on the energy-growth literature spillovers between crude prices, oil prices, and natural gas liquid composite prices. To this end, the recent novel Diebold and Yilmaz (2012) spillover index is utilized for daily realized data from January 2009 to October 31, 2019. The Diebold and Yilmaz index is employed given its uniqueness to highlight the following directional spillovers, total spillovers, pairwise spillover, and net spillover for the outlined variables. Further empirical investigation to accounts for both secular and cyclical properties is examined within the sampled framework. The study empirical results show a total spillover effect of 13.80% such that the contribution of shock from others is highest for liquefied natural gas (NGLC) price (43.2). The contribution of shocks to Brent price (7.5) and WTI price (3.0) was also received from others. Interestingly, the Brent price is observed to contribute the highest shock to others (41.4) considering the global adoption of the Brent crude oil as against the WTI which also contributes a shock of 12.9 to others. Based on these findings, several policy prescriptions were presented in the concluding section.

The aim of this chapter is to compare wave energy and offshore wind energy in economic terms. The future of energy and electricity production will be at ocean. In this sense, offshore wind and wave energy are the two main important offshore renewable energies. However, it is important to compare them in economic terms to calculate their feasibility in order to take strategic decisions. In this context, aspects such as the LCOE are calculated to provide an economic comparison of these two technologies. The methodology will be carried out for a particular case of study. The location selected for this purpose has the offshore wind resource, and the wave energy resource is very good: It is the region of Galicia (located in the northwest of Spain). Results indicate the best ocean renewable energy in economic terms. This comparison is useful for future considerations in order to select the best location for an offshore renewable energy farm.

The present study revisits the trade-off between economic growth and pollutant emission popularly known as the EKC hypothesis. This study distinct from the bulk of study in the literature by circumventing for omitted variable bias by the addition of total natural resources rent. Empirical investigation is conducted on an annual frequency data from 1971 to 2015. Conventional unit root test of Augmented Dickey-Fuller (ADF) and Phillips Perron (PP) unit root to establish stationarity properties. For long run (equilibrium) analysis the Pesaran’s ARDL bounds test traces equilibrium relationship between the outlined variables. The ARDL regression suggest that 1% increase in real income increases pollutant emission by 79.33% and 117.18% in short run and long run, respectively, while the electricity consumption positively increases pollutant emission in Nigeria. Interestingly, FDI inflow improves the quality of the environment by dampening emission. The current study validates the EKC hypothesis of the case of Nigeria. This suggests that the country is still at her scale stage of her economic growth trajectory where emphasis is placed on economic growth relative to quality of the environment. These outcomes are indicative to government administrators and environmental economists to be cautious on strategies to disentangle economic expansion from pollutant emissions there by necessitating the need for a paradigm shift to clean energy mix like renewable energy sources, which are globally recommended and environmental friendly.

This chapter hopes to urge energy-growth nexus researchers toward meta-analyses. The field suffers from the lack of a global relationship that would also provide the theoretical foundations that are so much needed in the energy-growth nexus. The chapter also shows the importance of meta-analysis in the energy-growth nexus and provides useful guidelines that must be followed for it to become verbose and successful. The energy-growth nexus is a topic with contradictory results that vary depending on the country, group of countries, period in which it is applied, and the employed method. A meta-analysis could contribute to making these studies more helpful and reliable as far as policy making is concerned. The chapter will demonstrate how data are collected in a meta-analysis, how they are screened and analyzed in a meta-regression model, as well as how they are interpreted, hoping to set the base for a continuous meta-analysis in the field. To this end, the chapter includes best case examples from the very few meta-analyses that have been implemented so far.

In the face of the global energy challenges and the associated climate issues, the transition to renewable energy sources continues to gain grounds. Proponents of renewable energy transition argue that renewable energy supply promotes economic growth. However, the concerns of variability in renewable energy supply cast doubt on the growth-driven argument. Thus, whether renewable energy supply will promote economic growth or not is an empirical question. This chapter examined the nexus between renewable energy supply and economic growth. As a contribution, this paper addressed potential problems of endogeneity and the precision of the long-run estimates. The result showed that renewable energy supply causes economic growth in the short run while economic growth causes renewable energy supply in the long run. Cointegrating estimates revealed positive effects of renewable energy supply on economic growth in the short run but negative effects on economic growth in the long run. The interdependency between renewable energy supply and economic growth implies that investment in renewable energy supply could stimulate economic growth but only in the short run.

As capital markets develop, the issue of whether this development improves the environmental quality rises very rapidly. Although not very documented, the literature has reached a consensus on the positive role of stock market development on carbon emissions in developing countries. Previous studies, however, do not include great number of countries to reach a broad consensus and assume that the effect does not change over time. Given these motivations, this study examines the impact of stock market development on carbon emissions in a panel of 60 developing countries over the period 1990–2014. Findings reveal that stock market development decreases environmental degradation in the short-run, whereas further development leads to environmental degradation in the long-run. Policy implications depending on these results are also discussed.

The aim of this thesis is to examine the asymmetric market behaviour in the supply-side and demand-side of the electricity market and the implications it has on government subsidy programme and electricity consumption/access. The study applied the nonlinear versions of the fully modified OLS, dynamic OLS and canonical cointegrating regression as a further robustness check. The study used annual data from 1976 to 2017. The results showed the integration of electricity and crude oil markets, with a significant long-run pass-through effect from crude oil price (i.e. input price) to the price of electricity (i.e. output price). There is a significant asymmetry in the response of electricity price to crude oil price changes, with suppliers of electricity absorbing more of lower crude oil price vis-a-vis higher crude oil price. This clearly shows that there exist market imperfections in the electricity sector. Lastly, consumers of electricity are more responsive to lower electricity price than higher electricity price. However, the existence of market imperfections could impede the government subsidy programme aimed at improving electricity access. Introducing competition and diversifying generating source in the sector to include renewable energy could prove very useful. In the short-term, however, subsidy programme aimed at improving electricity access can be effective if it targets the final price of electricity instead of the price of the critical input (i.e. oil).