Renewable energy and economic growth do have positive correlation as the former becomes source of potential power to foster revenue and various economic inputs. Economic growth has required renewable energy, indeed!
Recognizing the fact that economic growth requires energy and other decisive inputs to be sustainable and feasible, The Ethiopian Herald had a stay with Abdella Itefa, an agro-economist and energy researcher, who graduated from Haramaya University, to have a piece of information about the correlation between energy and economic transformation.
He said, “It is noted that growth and energy are positively linked. Economic growth increases the level of energy use, especially the need for fossil fuels. Renewable sources are environmentally friendly and low-carbon energy sources. Solar, wind, geothermal, and hydroelectric power do not produce greenhouse gases.”
Yes, Abdella said energy sources are rapidly powering economic growth and social development both in developed and developing countries. Developing countries such as Ethiopia are rapidly endorsing renewable energy as a vital engine of economic growth and societal development. In this regard, even though renewable energy production and consumption are in their infancy in Ethiopia, it has been taking concrete steps towards the development of renewable energy resources.
“The contribution of renewable energy towards economic growth is of paramount importance in boosting growth and food security. True, application of multiple econometric-based models has to be well intensified in the country. The electric power industry is designated as a driving force of the country’s economic growth. In line with the rapid expansion of the Ethiopia’s economy after the recent reform, there has been an increasing demand for electricity,” he said.
As to him, there has also been a growing interest in the assessment of the relationship between energy consumption and economic growth. The interaction between the quality of renewable energy and economic growth is of paramount importance in coming up with real growth.
According to Abdella, global climate change is one of the most serious threats facing the world, and it is primarily driven by anthropogenic greenhouse gas emissions.
As scientifically proven, the development of green technologies, such as renewable energy generation, can allow Ethiopia to effectively address climate change and other environmental problems while they also expand economic production as economic growth in modern societies is fundamentally at odds with environmental conservation since growth typically necessitates expanding consumption of energy and other resources.
He said, “The proportion of electricity generated from renewable energy sources such as hydro, wind, and solar power; geothermal and combustible biomass and wastes change the elasticity of the relationship between GDP per capita and CO2 emissions per capita from the electrical sector.” If the development of renewable energy sources leads to decoupling of GDP from emissions, the elasticity coefficient for GDP should be low in nations with a high percentage of their electricity from renewables and high in nations with a low percentage of their electricity from renewables, he added.
Abdella added that it is important to recognize that renewable energy sources as measured here include all sources of power.Since the development of renewable energies may affect the total energy consumption, the types of fossil fuels used, and/or the use of nuclear power may in turn influence dependence on fossil fuels, the assumption of a simple and direct link between renewables and fossil fuel use, and thereby CO2 emissions, is not necessarily valid, a point we return to in the following. We present analyses that examine these three possibilities.
He said, “It is well known that countries with more electricity from renewable sources typically have lower carbon dioxide emissions per capita than nations with less production of renewable energy.”
“Energy development, interpreted broadly to mean increased provision and use of energy services, is an integral part of enhanced economic development. Advanced industrialized societies use more energy per unit of economic output and far more energy per capita than poorer societies. Energy use per unit of output does seem to decline over time in the more advanced stages of industrialization, reflecting the adoption of increasingly more efficient technologies for energy production and utilization as well as changes in the composition of economic activity,” he added.
According to Abdella, the fact that expanded provision and use of energy services is strongly associated with economic development leaves open how important energy is as a causal factor in economic development.
He further elucidated that development involves a number of other steps besides those associated with energy, notably including the evolution of education and labor markets, financial institutions to support capital investment, modernization of agriculture, and provision of infrastructure for water, sanitation, and communications.
This is not just an academic question. Yes, energy development competes with other development opportunities in the allocation of scarce capital and in the allocation of scarce opportunities for policy and institutional reform. As to him, the growth of economy and income is the crucial driver of the economic approach, while the life expectancy and population growth rate are the key drives for the socio-economic progress.
social and economic factors paly an indispensable role in developing the economy and help reshape the future of national energy and the linkages among energy, other inputs, and economic activity clearly significantly change as the economy moves through different stages of development. At the lowest levels of income and social development, energy tends to come from harvested or scavenged biological sources (wood, dung, sunshine for drying) and human effort.
As to him, commercial fossil fuels and ultimately electricity become predominant in the most advanced stages of industrialization and development. Again, energy resources of different levels of development may be used concurrently at any given stage of economic development: electric lighting may be used concurrently with biomass cooking fires.
He said, “The importance of renewable energy cannot be ignored simply because the overall economic growth of the country mainly depends upon the consumption of energy. Economic growth and energy consumption go hand in hand with economic development.”
Economic development is taking place at a rapid pace, leading to the ever-increasing demand for energy. The main source of energy in the case of developing economies like Ethiopia is still conventional fossil fuels. The economic growth and dependence on fossil fuels for their energy requirements have created two major challenges, the first one being the sustaining of economic growth and the second being ensuring the continuous supply of energy at affordable prices, he said.
As to him, the primary policies regarding the promotion of renewable energy at present include policies related to providing subsidies for importing and manufacturing alternative energy sources, lowering the interest rates on loans for starting and adopting such technologies, and allowing the trading of green certificates to generate electricity using such sources.
To ensure the sustainable aspect of renewable energy sources, Ethiopia has to ensure efficiency in terms of production and utilization of these fuels. The energy steps explore the economic benefits of a net-zero grids, highlighting how clean energy projects support a thriving economy.
No doubt, he said Ethiopia enjoys abundant natural resources, which comprise renewable as well as nonrenewable sources such as oil, and natural gas, which are found mainly in the country’s major sedimentary basins, whereas the former source includes hydro, wind, bio-energy, solar, and geothermal.
The influence of renewable and conventional energy consumption on ecological sustainability can contribute to dynamic economic progress. Various sources of renewable energies (hydroelectric, wind, solar PV, geothermal and biomass power) and economic growth are of significantly useful in boosting national development.
He said “Renewable sources are environmentally friendly and low-carbon energy sources. Solar, wind, geothermal, and hydroelectric power do not produce greenhouse gases. In recent years, many countries have adopted renewable energy technologies to protect the environment. Additionally, various factors, such as energy supply security, energy dependency, climate change, energy price volatility, health issues, and environmental disasters, encouraged the consumption of renewable energy sources by emerging economies.”
As proved so far, he said, employing clean energy may not be beneficial in the early stages of production in expanding production activities in emerging economies such as Ethiopia as it is beneficial in the later stages of production.
Generally, accelerating the transition to a renewables-based energy system signifies a unique opportunity to meet climate goals while fueling economic growth, creating new employment opportunities and enhancing human welfare. Yes, he said measuring the economics provides the first quantification of the macroeconomic impacts of renewable energy deployment. The great energy challenge of the future is to meet the demand growth of economy in the ever-changing world. It can also contribute to the long-term resilience of the global energy system, which underpins economic development.
BY MENGESHA AMARE
THE ETHIOPIAN HERALD WEDNESDAY 6 SEPTEMBER 2023
