PROSPECTS OF RENEWABLE AND NON-RENEWABLE ENERGY SOURCES

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Transcript of PROSPECTS OF RENEWABLE AND NON-RENEWABLE ENERGY SOURCES

ENERGY SOURCES IN SOUTH ASIAN ECONOMIES: AN
ANALYSIS
BY
DOCTOR OF PHILOSOPHY
CERTIFICATE OF APPROVAL
This is to certify that the research work presented in this thesis, entitled, “Prospects of
Renewable and Non-Renewable Energy Sources in South Asian Economies: An Analysis”
was conducted by Mrs. Sadia Ali (Regd. No 2013-GCUF-05034) under the supervision of Dr.
Sofia Anwar.
CERTIFICATE BY SUPERVISORY COMMITTEE
We certify that the contents and form of a thesis submitted by Miss Sadia Ali,
registration No. 2013-GCUF-05034 has been found satisfactory and in accordance with
the prescribed format. We recommend it to be processed for the evaluation by the
External Examiner for the award of the degree.
Supervisor
Co-Supervisor
AUTHORS DECLARATION
I Sadia Ali, Reg. No 2013-GCUF-05034, here by state that my Ph.D. thesis title
“Prospects of Renewable and Non-Renewable Energy Sources in South Asian
Economies: An Analysis” is my own work and has not been submitted previously by
me for taking any degree from Government College University, Faisalabad or anywhere
else in the country/ world. At any time if my statement is found to be incorrect even
after my graduate the university has the right to withdraw my Ph.D. degree.
v
PLAGIARISM UNDERTAKING
I solemnly declare that research work presented in the thesis titled “Prospects of
Renewable and Non-Renewable Energy Sources in South Asian Economies: An Analysis”
is solely my research work with no significant contribution from any other person. Small
contribution/help wherever taken has bees been duly acknowledged and that complete thesis
has been written by me.
I understand the zero-tolerance policy of the HEC and Government College University,
Faisalabad towards plagiarism. Therefore, as an author of the above titled thesis declare that no
portion of my thesis has been plagiarized and any material used as reference is properly
referred/cited.
I undertake that if l am found guilty of any formal plagiarism in the above titled thesis
even after award of Ph.D. degree, the University reserve the rights to withdraw/revoke my Ph.D.
degree and that HEC and the University has the right to publish my name on the
HBC/University Website on which names of students are placed who submitted plagiarized
thesis.
vi
DEDICATION
“Muhammad Amir Javed”
For Their Love, Prayers and Made Me Keen for Learning
vii
ACKNOWLEDGEMENTS
First of all, I would praise the Almighty Allah, the Gracious and the Most Merciful, for
giving me the quality and inspiration to complete this examination.
I might want to thank my Supervisor, Dr. Sofia Anwar not just for her few astute
remarks concerning the bearing and the substance of this proposition, yet in addition
for her human state of mind and for being understanding. She prepared me how to make
inquiries and express my thoughts. She indicated me diverse approaches to approach
an exploration issue and the need to steady keeping in mind the end goal to achieve any
objective. She showed me how to buckle down. I sincerely value the time she has
committed to regulate my exploration.
I might want to formally recognize and thank various individuals, particularly my co-
supervisor, Dr. Samia Nasreen who empowered, supported and helped me through the
testing a very long time of my Ph. D examinations. Thanks to Dr. Muhammad Rizwan
Yasin for agreeing to serve on my committee. I am also thankful to Dr Muhammad
Sohail Amjad Makhdom for his encouragement and support during my PhD.
Last, yet not slightest, I thank my family: my parents, for giving me life in the first
place, for instructing, educating, support and consolation to seek my interests. My
husband, my siblings for tuning in to my protests and dissatisfactions, and for having
faith in me.
AUTHORS DECLARATION…………………………………………....…………..iv
PLAGIARISM UNDERTAKING…………………….…………………………........v
2.1 Empirical Literature.........................................................................................…...12
2.1.2 Renewable and nonrenewable energy consumption and environment
quality…………………………………………………………………………...……30
2.1.4 Renewable and Non-Renewable Energy Sources, Energy Intensity, Economic
Growth………………………………………………………………………………..47
Sources………………………………………….……………………..…….…….....51
3. METHODOLOGY....…………..……………………………………………...71
3.2.1.1 Model 1. Relationship between Renewable and Non-renewable Energy,
Institutions and Economic Growth …………………………………………..………72
3.2.1.2 Model 2: Relationship between Renewable and Non-renewable Energy,
Urbanization and Economic Growth…………..…………………………..………….73
3.2.1.3 Model 3: Relationship between Renewable and Non-renewable Energy,
Financial Development and Economic Growth ………………...….………………....74
3.2.1.4 Data Sources…...…………...….…………………………………..…………75
Population Density and Environment ………………………..……………...………..75
3.2.2.2 Model 5: Relationship between Renewable and Non-renewable Energy,
Urbanization, Energy Intensity and Environment …….…………………..….……....76
3.2.2.3 Data Sources……………………………………………………………….…78
3.2.3.1 Model 6: Relationship between Renewable Energy Demand, Economic Growth,
Industrialization, Technological Changes and Energy Price ………………..……….78
3.2.3.2 Model 7: Relationship between Non-Renewable Energy Demand, Economic
Growth, Industrialization, Technological Changes and Energy Price …………….…79
3.2.3.3 Data Sources…………………………………………………………….……81
Economic Growth, Urbanization and Energy Intensity ………………...…….………82
3.2.4.2 Model 9: Relationship between Renewable and Non-renewable Energy,
Economic Growth, Trade Openness and Energy Intensity ……………...……………82
3.2.4.3 Model 10: Relationship between Renewable and Non-renewable Energy,
Economic Growth, Industrialization, Technological Progress and Energy Intensity....82
3.2.4.4 Data Sources………………………………………………………………….83
3.3.2.1 Panel Unit Root Tests………………………………………………………....88
3.3.2.1.1 LLC Unit Root Test…….………………………..………………...………..88
3.3.2.1.2 IPS Unit Root Test………………………..………………………………...90
3.3.2.2 Panel Co-integration Test…………………………………………..…………91
3.3.2.2.1 Estimation of Panel Co-integration Regression……….……………...…….93
3.3.3 Panel Granger Causality Test …………………………………………………..94
4. RESULTS AND DISCUSSIONS……………………….…………………………96
4.1 An Overview of South Asian Economies…….…….………….…………...…….96
4.1.1 Economic Structure………………..…………………………………………...96
4.1.1.1 Economic Growth………………..……………………………………...……96
4.3 Importance and Potential of Renewable Energy Sources ……………............…105
xi
4.4 Empirical results and discussions……………………………………………..…108
4.4.1 Impact of renewable and nonrenewable energy on economic growth……....…108
4.4.1.1 Model 1: Relationship between Renewable and Non-renewable Energy,
Institutions and Economic Growth ………..……………………………..…….….108
4.4.1.1.1. Time Series Results…………………………………….……...................108
4.4.1.1.1.1. Unit Root Test Results………………………..…..……………….…...108
4.4.1.1.1.2. Johansen Co-integration Test Results…………………………..……....110
4.4.1.1.2 Panel Results…………………………………………………………....…111
4.4.1.1.2.2 Panel Co-integration Results………………………...…………………..113
4.4.1.1.3 FMOLS Estimates……………...…………………………...…..…………113
4.4.1.1.3.2 FMOLS Panel Estimates……………………….……………………..…115
4.4.1.1.4 Panel Causality Results…………...…………………………………...…..116
4.4.1.2 Model 2: Relationship between Renewable and Non-renewable Energy,
Urbanization and Economic Growth ……………………………………………..…117
4.4.1.2.1 Time Series Results……………………………………………………..…117
4.4.1.2.1.1 Unit Root Test Results……………………………...……………..…….117
4.4.1.2.1.2 Johansen Co-integration Test Results………………………....………...118
4.4.1.2.2 Panel Results………………………...…………………..……………...…120
4.4.1.2.2.2 Panel Co-integration Results…………………………..…..…………….121
4.4.1.2.3 FMOLS Estimates……………………………...………………………….122
4.4.1.2.3.2 FMOLS Panel Estimates………………………………………...………123
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4.4.1.3 Model 3: Relationship between Renewable and Non-renewable Energy,
Financial Development and Economic Growth ………….…….………………..….125
4.4.1.3.1 Time Series Results………..…….………………….…………………..…125
4.4.1.3.1.1 Unit Root Test Results……………………………….…...…………..…125
4.4.1.3.1.2 Johansen Co-integration Test Results…………....………………...……126
4.4.1.3.2 Panel Results……………………………………………...……….……...128
4.4.1.3.2.2 Panel Co-integration Results………………………………………….....129
4.4.1.3.3 FMOLS Estimates……………………………………………………...….130
4.4.1.3.3.2 FMOLS Panel Estimates………………………………………………...131
4.4.1.3.4 Panel Causality Results……………………………………………………132
4.4.2. Impact of Renewable and Non-Renewable Energy Sources on Environmental
Quality………………………………………………………………………...…….133
Population Density and Environment ………………………………………………133
4.4.2.1.1 Time Series Results………………………………..………………………133
4.4.2.1.1.1 Unit Root Test Results…………………….…..……………………..….133
4.4.2.1.1.2 Johansen Co-integration Test Results……..…...…………...…………...135
4.4.2.1.2 Panel Results…………………………………….……………………...…137
4.4.2.1.2.2 Panel Co-integration Results………...………………………………..…138
4.4.2.1.3 FMOLS Estimates…………………..………………………………..……139
4.4.2.1.3.2 FMOLS Panel Estimates……...……..………………………………..…140
4.4.2.1.3.4 Panel Causality Results………………………………………….………142
xiii
Urbanization, Energy Intensity and Environment…..………………………...…….143
4.4.2.2.1 Time Series Results………………………………..………………………143
4.4.2.2.1.1 Unit Root Test Results…………………….…..……………………..….143
4.4.2.2.1.2 Johansen Co-integration Test Results……..…...…………...…………...145
4.4.2.2.2 Panel Results…………………………………….……………………...…147
4.4.2.2.2.2 Panel Co-integration Results………...………………………………..…148
4.4.2.2.3 FMOLS Estimates…………………..………………………………..……149
4.4.2.2.3.2 FMOLS Panel Estimates……...……..…………………………………..151
4.4.2.2.3.4 Panel Causality Results………………………………………….………152
4.4.3 Demand for Renewable and Non-Renewable Energy Sources…………...……153
4.4.3.1 Model 6: Demand for Renewable Energy Sources……………………….….153
4.4.3.1.1 Time Series Results…………………………………………………….….153
4.4.3.1.1.1 Unit Root Test Results……………………………………………...…...153
4.4.3.1.1.2 Johansen Co-integration Test Results………………………………...…158
4.4.3.1.2 Panel Results……...…………………………………….…………………156
4.4.3.1.2.2 Panel Co-integration Results……………………………………..……...158
4.4.3.1.3 FMOLS Estimates……………………………………………………...….158
4.4.3.1.3.2 FMOLS Panel Estimates………………………………………………...160
4.4.3.1.4 Panel Causality Results……………………………………………………161
4.4.3.1.5 Test of Forecasting Renewable Energy Demand…………………………162
4.4.3.1.5.1 Variance Decomposition of RE Demand…...………………...…….…...162
xiv
4.4.3.2. Model 7: Demand for Non-Renewable Energy Sources…………...………..162
4.4.3.2.1 Time Series Results…….………………….………………………………162
4.4.3.2.1.1 Unit Root Test Results……………………………………………….….162
4.4.3.2.1.2 Johansen Co-integration Test Results…………………………………...164
4.4.3.2.2 Panel Results..……………………………………………………………..166
4.4.3.2.2.2 Panel Co-integration Results…………………………………………….167
4.4.3.2.3 FMOLS Estimates……………………………………………….………...167
4.4.3.2.3.2 FMOLS Panel Estimates…………………………………………….…..169
4.4.3.2.4 Panel Causality Results………………………………………………....…170
4.4.3.2.5 Test of Forecasting Non-Renewable Energy Demand……………………171
4.4.3.2.5.1 Variance Decomposition of NRE Demand……………………………...171
4.4.3.2.5.2 Impulse Response Function of NRE Demand…………………………...171
4.4.4. Impact of Renewable and Non-Renewable Energy Sources on Energy
Intensity……………………………………………………………………..171
Economic Growth, Urbanization and Energy Intensity ………………..……171
4.4.4.1.1 Time Series Results……….………………………………………….……171
4.4.4.1.1.1 Unit Root Test Results….…………………………………………...…..171
4.4.4.1.1.2 Johansen Co-integration Test Results………………………………...…173
4.4.4.1.2 Panel Results………………………………………………………………175
4.4.4.1.2.2 Panel Co-integration Results…………………………………………….176
4.4.4.1.3 FMOLS Estimates…………………………………………..……..………177
4.4.4.1.3.2 FMOLS Panel Estimates…………………………………….……..……178
4.4.4.1.4 Panel Causality Results……………………………………….………...…179
4.4.4.2 Model 9: Relationship between Renewable and Non-renewable Energy,
Economic Growth, Trade Openness and Energy Intensity ………………………….180
4.4.4.2.1 Time Series Results………………………………………….…………….180
4.4.4.2.1.1 Unit Root Test Results…………………………………………………..180
4.4.4.2.1.2 Johansen Co-integration Test Results……………….…………………..182
4.4.4.2.2 Panel Results………………………………………………………………183
4.4.4.2.2.2 Panel Co-integration Results…………………………………………….185
4.4.4.2.3 FMOLS Estimates……………………………………….…...……………185
4.4.4.2.3.2 FMOLS Panel Estimates……………………………………….………..187
4.4.4.2.4 Panel Causality Results…………………...………………………...……..188
4.4.4.3. Model 10: Relationship between Renewable and Non-renewable Energy,
Economic Growth, Industrialization, Technological Progress and Energy Intensity
………………………………………………………………………………….…...189
4.4.4.3.1.1. Unit Root Test Results……………………………………….…………189
4.4.4.3.1.2. Johansen Co-integration Test Results…………………………………..191
4.4.4.3.2 Panel Results …………………………………………………………..….192
4.4.4.3.2.2 Panel Co-integration Results………………………………...…………..194
4.4.4.3.3 FMOLS Estimates…………………………………………………………195
xvi
5.2 Policy recommendation...………………………………………………….........202
Table 4.1 Energy Dependence of Selected South Asian Countries………………….102
Table 4.2 Production and Use of Energy ……………………………………………102
Table 4.3 Non-renewable Energy Sources (oil)……………………………..………103
Table 4.4 Non-renewable Energy Sources (Gas)……………..………………….....103
Table 4.5 Non-renewable Energy Sources (Coal)…………………………..………104
Table 4.6 Renewable Energy Sources (Hydro)………………………………...……104
Table 4.7 Renewable Energy Sources……………………………………………….104
Table 4.8 Importance of Renewable and Non-renewable energy sources……..……105
Table 4.9 Renewable Energy potential………………………………………………107
Table 4.10 DF GLS Unit root Test……………..…….……………………...…..….109
Table 4.11 Johansen Co-integration Test results.....………………………...……….110
Table 4.12 Panel Unit root Test…..……………………………………….....………112
Table 4.13 Panel co-integration Test …………………………..………...….………113
Table 4.14 FMOLS Country Specific Results…………...………………,………….114
Table 4.15 FMOLS Panel Estimates………………………...………...…….………116
Table 4.16 DH panel causality Test …………………………………..……..………116
Table 4.17 DF GLS Unit root Test …………………………….…..……………......117
Table 4.18 Johansen Co-integration Test results……………..…..…………………119
Table 4.19 Panel Unit root Test…..…………………………..……..………………120
Table 4.20 Panel Co-integration Test ……………………………...………………..121
Table 4.21 FMOLS Country Specific Results…………………….…………………122
Table 4.22 FMOLS Panel Estimates……………………………...…………………124
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Table 4.24 DF GLS Unit root Test…………………...……………………………..125
Table 4.25 Johansen Co-integration Test results.…………………………...……….127
Table 4.26 Panel Unit root Test……………………..……………………..……..…128
Table 4.27 Panel co-integration Test …………………….…………….………...…129
Table 4.28 FMOLS Country Specific Results………………………………….…...130
Table 4.29 FMOLS Panel Estimates…………………………………….……….….132
Table 4.30 DH panel causality Test ……………………………….……..……….…133
Table 4.31 DF GLS Unit root Test …………………………………………..….......134
Table 4.32 Johansen Co-integration Test results…………………….………..….…135
Table 4.33 Panel Unit root Test…………………………………………..…………137
Table 4.34 Panel Co-integration Test …………………..…………………………..138
Table 4.35 FMOLS Country Specific Results………………………………………139
Table 4.36 FMOLS Panel Estimates……………………………………..…….……141
Table 4.37: FMOLS Country Specific Results ……………………………………...142
Table 4.38 DF GLS Unit root Test…………………...………………………….….143
Table 4.39 Johansen Co-integration Test results.…………………………...………145
Table 4.40 Panel Unit root Test……………………..……………………..………..147
Table 4.41 Panel co-integration Test ………………...………………….………..…148
Table 4.42 FMOLS Country Specific Results……………………………………....149
Table 4.43 FMOLS Panel Estimates……………………………………..…….……151
Table 4.44 DH panel causality Test …………………………..…………..…….…...152
Table 4.45 DF GLS Unit root Test…………………...………………….……….….153
Table 4.46 Johansen Co-integration Test results.…………………………...………155
xix
Table 4.48 Panel co-integration Test …………………..……………….………..…158
Table 4.49 FMOLS Country Specific Results……………………………………....159
Table 4.50 FMOLS Panel Estimates…………………………………….……..……160
Table 4.51 DH panel causality Test ……………………………………..……..…...161
Table 4.52 DF GLS Unit root Test…………………...………………….……….….163
Table 4.53 Johansen Co-integration Test results.…………………………...………164
Table 4.54 Panel Unit root Test……………………..……………………..…….…..166
Table 4.55 Panel co-integration Test ………………..………………….………...…167
Table 4.56 FMOLS Country Specific Results…………………………………….....168
Table 4.57 FMOLS Panel Estimates…………………………………….…….….…169
Table 4.58 DH panel causality Test ……………………………………..…….…....170
Table 4.59 DF GLS Unit root Test…………………...………………….….………172
Table 4.60 Johansen Co-integration Test results.…………………………...……….173
Table 4.61 Panel Unit root Test……………………..……………………..………..175
Table 4.62 Panel co-integration Test ……………………….………….….…….….176
Table 4.63 FMOLS Country Specific Results……………………………………....177
Table 4.64 FMOLS Panel Estimates…………………………………….…….……179
Table 4.65 DH panel causality Test ……………………………………..…….….....179
Table 4.66 DF GLS Unit root Test…………………...………………….………….180
Table 4.67 Johansen Co-integration Test results.…………………………...………182
Table 4.68 Panel Unit root Test……………………..……………………..………..184
Table 4.69 Panel co-integration Test …………………………….…….…..…….…185
Table 4.70 FMOLS Country Specific Results……………………………….……....186
xx
Table 4.72 DH panel causality Test ……………………………………..……...…...188
Table 4.73 DF GLS Unit root Test…………………...………………….…….…….189
Table 4.74 Johansen Co-integration Test results.…………………………...….……191
Table 4.75 Panel Unit root Test……………………..……………………..………..193
Table 4.76 Panel co-integration Test ………………………….……….……...….…194
Table 4.77 FMOLS Country Specific Results………………………………….…....195
Table 4.78 FMOLS Panel Estimates…………………………………….……..……197
Table 4.79 DH panel causality Test ……………………………………..……..…...198
Table A1 Variable Description ………………………………………….……..……238
Table B1 Summary Statistics of the variables Panel data 1980-2014………………240
Table B2 Summary Statistics of the variables Time Series data 1980-2014….…….241
Table C1 Variance Decomposition of RE Demand…………………………………244
Table C2 Impulse Response Function of RE Demand………………………………245
Table C3 Variance Decomposition of NRE Demand……………….……………….246
Table C4 Impulse Response Function of NRE Demand……………………………..247
xxi
Figure 4.3: Trends in Industrial share of GDP……………...….…………..………….98
Figure 4.4: Trends in Total Population ………………….…….…………..………….99
Figure 4.5: Trends Population Density………………….…….…………..………….99
Figure 4.6: Trends in per capita Co2 ………………………….…………...….……100
Figure 4.7: Trends in Non-Renewable energy Sources…………………….…….…101
Figure 4.8: Trends in Renewable energy Sources…………………………..………102
xxii
EI Energy Intensity
EFI Energy Efficiency
NRE Nonrenewable Energy
PD Population Density
RE Renewable Energy
TO Trade Openness
xxiii
ABSTRACT
The core target of this exploration is to inspect the effect of renewable and
nonrenewable energy sources on economic growth and environmental degradation in
selected South Asian Economies. The thesis explores renewable and non-renewable
energy sources in four ways. Firstly, it empirically investigates the relationship between
renewable, non-renewable energy, and economic growth. Secondly, it empirically
investigates the impact of renewable and non-renewable energy sources on
environmental quality. Thirdly, it examines the determinants of demand for renewable
and non-renewable energy sources including industrial sector. Fourthly, the study
explores the impact of aforementioned energy sources and economic growth on energy
intensity. The thesis comprises on four South Asian countries: Pakistan, India,
Bangladesh and Sri Lanka for empirical investigation, based on the availability of data.
The study employs both time series and panel data analysis for the period of 1980 to
2014. To analyze the long run and causal relationship between variables, we have
applied Johansson co-integration, Larsson panel co-integration and Granger causality
Dumitrescu and Hurlin (DH) approaches. Empirical results confirm the presence of
long run co-integration between economic growth, renewable energy sources, non-
renewable energy sources, institution quality, population density, financial
development, inflation, and trade openness in various models. The impact of renewable
and non-renewable energy on economic growth is found positive which increases per
capita GDP. The analysis of fully modified ordinary least squares (FMOLS) panel
estimates shows that the values of all coefficients are statistically significant and their
signs are in line with the economic growth theory.
Secondly, the results reveal that economic growth, population density, and non-
renewable energy have a positive impact on per capita CO2 emission. However, the
negative sign of renewable energy sources tends to decrease per capita CO2 emissions,
indicating that environmental quality deteriorates with non-renewable energy sources
and improves in case of renewable energy sources. The findings additionally encourage
the Environmental Kuznets Curve (EKC) hypothesis which accepts an altered U-shaped
path amongst affluence and per capita CO2 emissions. Moreover, the study found the
evidence of bi-directional panel causality between CO2 and renewable energy sources
as well as population destiny. Investigations give the evidence of unidirectional
xxiv
causality running from CO2 to non-renewable energy sources. Results also give proof
evidence of feedback relationship between environment and both energy sources.
In the other model of the causal relationship between environmental quality and energy
intensity with the presence of urbanization with both energy sources and population,
outcomes affirm the existence of co-integration between these factors. FMOLS
discovered the positive effect of affluence, urbanization, energy intensity and non-
renewable energy sources on CO2 emissions. Notwithstanding, the negative indication
of renewable energy sources demonstrate that it will prompt diminishing per capita
CO2.
Thirdly, the empirical analysis of renewable and non-renewable energy demand shows
that the price and income are the major determinants of the demand for energy. The
impact of income on energy demand is positive in both energy sources whereas, in case
of price, it has a negative impact. The results of technological progress show a negative
impact on energy demand, which suggests that technological progress is energy saving.
Results of FMOLS indicate that increase in economic growth, industrialization and
population total increases energy demand (renewable and non-renewable). These
results show that higher per capita real income should result in greater economic
activity which in turns accelerate the use of energy. The degree of industrialization, as
a measure of economic structure, is also expected to enhance the demand for renewable
energy. However, the negative sign of P and T indicates that increase in energy price
and technical progress will lead to decrease energy demand. The negative sign of
technical progress shows that the technology is energy saving.
Lastly, the impact of economic growth, population density and renewable energy on
energy intensity is found negative, which suggests that there is a reduction in energy
intensity with the increase in aforesaid factors. On the other hand, reduction in energy
intensity leads to the improvements in energy efficiency. Results of panel FMOLS
indicate that 1 percent increase in economic growth, renewable energy sources, and
population density decrease the energy intensity by about 0.600 percent, 0.027 percent
and 0.960 percent respectively which leads to increase in energy efficiency. Moreover,
the study found the evidence of bi-directional panel causality between energy intensity
and economic growth, urbanization as well as between energy intensity and population
density. Results provide evidence of feedback relationship between energy efficiency
xxv
and output. There is also unidirectional causality running from energy intensity to
renewable and non-renewable energy sources.
Keywords: Economic Growth, Environmental quality, Renewable energy, Non-
renewable Energy, Institutional quality, Industrialization, Energy Demand, Energy
Price, Population Density, South Asia
1
INTRODUCTION
Energy is a fundamental component of human needs. Although it is not viewed as
compulsory requirement but is essential for the fulfillment of daily human needs (Yuko,
2004). Due to the rapid progress and industrialization improvements, the level and
power of energy utilization is essential for a nation's economic development. The
fundamental sources of energy are separated into two vital categories that is traditional
and maintainable energy sources. Traditional sources can be classified as energy from
non-renewable assets. These sources have various difficulties that include
contamination and an unnatural weather change; this has rolled out nation’s
improvement strategies to support reception of greener innovations in renewable power
sources. Renewable or maintainable energy sources are characterized as energy that can
be accomplished from assets which are actually renewed on a human extent, for
example daylight, biogas, wind, hydropower, tides, waves and geothermal warmth.
Renewable energy sources can be substituted regular or traditional sources in four
recognizable zones: power era, high temp water/space warming, engine fills, and
countryside (off-network) energy administrations. Petroleum product from fossil fuel
which incorporates coal, oil and flammable gas drove world economic development,
however this energizes arrival of carbon dioxide CO2 into the earth air, is viewed as
the fundamental driver of a dangerous atmospheric deviation and environmental change
(Stern, 2006). Renewable sources such as solar, wind, geothermal, tidal, and biomass
have an unlimited supply and these are being recycled or replaced. While energy
coming from fossil fuels, coal, oil and natural gas are non-renewable sources of energy
which is exhaustible up to a limit . We cannot enjoy the benefits of these non-renewable
energy sources forever, because they become unavailable once exhausted or in other
words these are one time use resources. Even the over-consumption of such sources can
leads to its threshold level, from where they cannot be regenerated for centuries.
Energy can be used for illumination, lighting, warming, and cookery on the one hand
and also as a medium of transportation on the other hand. Energy is required for
manufacturing consumer goods as well as capital equipment both in household and
production sectors. Globally, the demand for energy is increasing day by day. The
reasons are multiple, for instance, shift to industrialization, the introduction of new
2
technology, modernization and most importantly the desire for having a more
comfortable standard of living.
Energy is measured as an essential source for the socio-economic development of a
country whether it is renewable energy or non-renewable energy. Thus, each and every
sector of the economy has shared involvement of energy like in agriculture, industry,
transportation, social and public sector, household and business sector or trade, the use
of energy has become inevitable. Most of the developing and underdeveloped nations
are facing the issue of shortage of energy relative to its needs. (Chaudhry et al., 2015).
Traditional sources such as oil, natural gas, coal and electricity from oil are the most
important sources of energy and this energy supply approximately 90 percent of total
energy requirements at world level (Riaz, 1984). The sharp increase in oil prices and a
shortage of energy creates barriers to bring the rapid growth of the economy (Chaudhry
et al., 2015).
Economic growth of a country is denoted by the gain in Gross Domestic Product (GDP)
or the value of country’s output. On the other hand, economic development of a country
is related to the rise in the living standards…