The effect of renewable energy consumption on economic growth. Evidence from the East African Community

Abstract

Achieving the goals of sustainable development and poverty reduction implies an important condition for access to electricity for the entire population. In the economic literature, the relationship between electricity consumption and economic growth has different perspectives. The lack of good governance within an economy, besides the deficiencies of energy resources, is a key issue in worsening energy issues for developing countries. These countries have failed to alleviate the energy crises that have hindered development prospects, amid flourishing corruption and inefficient governments. Our research, using a panel methodology, analyzes the long-term relationship between energy consumption, economic growth and good governance for 6 East African Community countries over the period 2000 –2020. The study demonstrates empirically that there is a causal relationship between electricity consumption and economic growth, underlining the fact that deficiencies in the energy system lead to slowing economic growth. The study also shows that good governance influences electricity and Gross Domestic Product (GDP) consumption, and the governments from East African Community countries have to restore good governance in the economy, creating an environment conducive to investment in the energy sector, which would increase competition and reduce inefficiencies in the production, transmission, and distribution of energy.