The dynamic impact of renewable energy on the economic growth

Abstract

This study aims to scrutinize the impact of renewable energy consumption on Rwanda's economic growth between 1990 and 2021, the demand for renewable energy is increasing due to its use in various sectors, driven by technological progress and population growth. Rwanda is emphasizing the importance of utilizing renewable energy sources as a means of reducing carbon dioxide emissions that result from the energy of non-renewable sources. Hence, the primary question that arises is whether the usage of renewable energy sources aids in the development of economic growth. In this study, various econometrics tests, including the Augmented Dickey-Fuller Test and Johansen co-integration test, are utilized, additionally, the Granger causality test is employed to explore potential causal relationships between the variables. The study uses time series causality to indicate the short-term and long-term relationship among variables. Bidirectional causality occurs between renewable energy and growth rate in the short term, while unidirectional causality occurs in the long term. Additionally, Renewable energy consumption, GDP, energy intensity, labor, and inflation all have a positive impact on economic growth; specifically, renewable energy consumption contributes positively to economic growth by 26.4%. An analysis reveals that renewable energy decreases CO2 emissions, while general energy consumption increases them.