Open AccessRenewable Energy Consumption Shocks on CO2 Emissions and Economic Growth of Nigeria
Author(s) -
Nnaemeka Emmanuel Ezenwa,
Victor Okechukwu Nwatu,
Obindah Gershon
Publication year - 2021
Publication title -
iop conference series earth and environmental science
Language(s) - English
Resource type - Journals
eISSN - 1755-1307
pISSN - 1755-1315
DOI - 10.1088/1755-1315/665/1/012013
Subject(s) - economics , renewable energy , natural resource economics , granger causality , variance decomposition of forecast errors , nexus (standard) , consumption (sociology) , real gross domestic product , error correction model , energy consumption , cointegration , macroeconomics , econometrics , biology , engineering , ecology , social science , sociology , computer science , electrical engineering , embedded system
The paper examines the nexus among economic growth, renewable energy consumption and CO2 pollution in Nigeria. The study tested for co-integration using the Johansen technique, which is evident and applied the vector error correction model (VECM) on the annual data for the period 1990-2015. The results indicate a bi-directional causality between renewable energy consumption (REC) and economic growth (GDP). REC positively granger causes GDP in both short-run and long-run, while GDP has an adverse effect on REC in the short run. Historical decomposition of shocks reveals the relative implications of renewable energy shocks on GDP to be mostly negative between period 1990 and 2007. This is as a result of inefficient renewable technologies during the period. However, there is persistent and positive influence of REC on economic growth in the period between 2009 and 2015. Increase use of renewable technologies due to its relative affordability and better efficiency contributes to the progressive influence on economic growth. The variance decomposition analysis predicts an increase in the use of renewable energy technologies in the five year forecast period, with CO2 emissions will increasing as a consequence of dependence fossil fuel energy resources. The paper suggests environmental and tax policy instruments, as well as, effective governance to enhance environmental quality and encourage sustainable/green economic growth. The key instruments include: grants, feed-in-tariffs (FIT), production tax credits, renewable portfolio standards (RPS), and loans to enable industrial sector invest in renewable energy.