Turnitin Submission

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Impact of renewable and non-renewable resource consumption on the GDP
Introduction
The topic in discussion is the impact of renewable and non-renewable resource consumption on
the GDP. The idea behind this topic is to determine whether renewable resources have
marginally greater impact on GDP or not. I have chosen to include a mix of developed and
developing countries that being in different regions of the world, the reason being; it allows for a
more diversified regression and more dynamic results. The poor/ developing countries on the list
are particularly from the South Asian region and the reason for their inclusion is the heavy
dependence on imported resources for energy production. A lot of the national debt and budget
deficit comes from the imported expensive fuel such as oil and gas. There needs to be a way out
of this so that these countries can independently meet their energy needs and progress forward.
The aim of renewable energy resources is to provide clean and sustainable energy and by clean, I
mean energy production that as zero (or minimal) environmental harm and CO2 emissions.
Sustainability refers to the idea of satisfying current consumption needs without harming the
consumption of future generations. For Pakistan, it is proved that environmental betterment does
lead to human development (Zhaohua Wang 2018). It is of utmost importance, particularly for
the countries listed above, that they invest more in renewable energy. Not only is there enough
potential, that will be discussed later, but feasibility studies are very hopeful too. Talking to stats,
(Zeshan and Muhammad 2011) claims that non-renewable energy production alone passes nearly
87% CO2 into the environment. With this research paper, I ought to examine if the renewable
energy resources have marginally better impact on the GDP, then the non-renewable resources
when we account for other factors such as environmental damage, inflation, HDI and other life
indexes that are qualitative in nature and I’m confident that renewable energy does lead to a
better economy at least in the long-run. This is also backed by existing researches such as
(Sardorsky, 2009).
My regression equation is quite simple, the independent variables are either the renewable
energy resources, non-renewable energy resources or the control variables. The most significant
variable would be the Oil consumption (β1) since it is estimated that more than half of the energy
needs are met with the output of oil-based energy plants. Other variables, listed in terms of
significance, are the Gas (β2), Coal (β3), Nuclear (β4) and then the renewable resource variables
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Hydro (β5), Solar and Wind as combined renewable output (β6). We also have a variable for
combined non-renewable energy output (β7) These variables are all listed in according to the
expected significance they might have towards the dependent variable which is GDP. Other
variables that we have as a control variable are Urbanization (β8), Pollution level (β9), the public
health expenditure (β10) and the trade as percentage of GDP (β11). These variables are included in
order to examine the qualitative elements of energy uses. The dependent variable, GDP is the
gross value of all the produce within the geographical region of a country, and I have chosen it as
an explained variable because it would allow us to build a direct relationship between the energy
output and industrial produce which is a natural flow of resources in any given economy.
It has been estimated that Pakistan currently has only 5% of its on-grid electricity supply coming
from renewable energy resources (GOP, 2016) which comes out to be 1.092/26 GW of total
energy and it is very disappointing to know that the estimated potential energy production from
the Wind plants alone is 122.6 GW which is exponentially greater than the projected energy
needs of Pakistan. This means these countries could not only meet their own energy needs, save
on foreign reserves, protect the environment but could also sell the surplus energy to neighbor
countries. This would allow each individual country to not only do good to itself but to others
around it. The South Asian region is all connected by land, all the countries could grow as a
single identity by becoming a recognized economic welfare region.
The data source is multiple public data bases such as World Bank, respective governments and
energy institutes and the time frame for research is between 2000-2019. I will be including the
data in cumulative units that are reported such as Gigawatts (GW) of energy produced, GDP per
capita and health expenditure in billions of local USDs. The existing researches are either
relatively old, 1980s and before, or are covering a different aspect of the topic such as
environmental degradation, energy consumption and economic growth, potential of biomass in
Pakistan etc. What I plan on to do with this research is combine all sources of energy and
compare them side-by-side to be the impact and significance they carry on the output of the
economy (GDP).
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Literature Review
Historical Background
Similar to how resource consumption is positively correlated to energy production, output
generation is also strongly correlated to energy consumption. It’s a one-way chain where no
single step can be skipped. We know that input resources are the most crucial component for an
economic activity irrespective of the level: be it individual, corporate, or at a national level. The
amount of resource extraction and consumption has only been accelerated over the course of
human existence and since the Industrial revolution, this has circle has seen an exponential
growth.
Until the late 20th century, the only emphasis was on output growth, irrespective of the source of
inputs and its impact on environment and society. As time progressed, activists realized how
damaging the extraction and consumption of fossil fuels was. Significant research undertook to
determine the scope of damage, the introduction of high-pressure fuel lines, injectors,
combustion engines and transport as whole brought about rise in demand of Oil in the early 20 th
century (Smith 2000) this asked for methods to pump oil from beneath the earth the sea surface
and the drilling was so damaging to the environment that no other economic activity could be
under taken in a proximity of several kilometers.
This concern over environmental degradation rose to popularity with the emergence of media
and researchers were forced to think of alternative sources of energy and to minimize the
consumption of fossils with higher efficiency equipment. The mechanical energy from flowing
water, aka hydro energy, was invented in France 1880 (Pang et al. 2015) and commercial large
scale wind energy machines were invented and installed in around 1981 and 1990 in California,
the USA (John Keldellis 2011). Solar energy, while being a relatively new technology, is among
the fastest growing and adapted source of energy and has been implemented from large scale
commercial factories to national grid projects and all the way down to powering electric vehicles
and cell phone charging devices. All these mediums of harvesting energy out of the indefinite
sources and without making any or minimal damage to the environment are called renewable
energy or green energy. The benefits of such energy clearly outweigh its costs and since
opportunity of not using them is so high, certainly every county today is putting immense efforts
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into commercializing and up scaling green energy in order to fight against environmental
degradation, pollution, global warming and other threats to future generations. In fact, renewable
energy is actually being ONLY way forward.
Energy production, its source and the extent to which it helps in output growth (GDP) is of a real
concern particularly for developing countries with severe deficit of resources and income. Our
concern revolves around sub-continental countries that include India, Afghanistan and Nepal
while the main emphasis would be on the economy of Pakistan and other nations would be for
reference. The scope of this study would be to determine how different resources impact output
production and contribute to the GDP of each country and parallel to which we’d be accessing
the pollution index and environmental impact.
My hypothesis would be about sources of renewable energy having a marginally better pay-off in
terms of the output growth, at least in the long run irrespective of the cost of inputs. While very
less research has been carried out in this discipline, few existing studies have been conducted,
among which one study the cognation among economic growth, renewable energy consumption
and human development index Pakistan for the period 1990–2014 (Zhaohua Wang 2018) which
claims that environment factors does contribute to the human development process. Another
study claims that energy utilization from non-renewable resources alone has about 87% of the
total impact on CO2 emissions in Pakistan which means it has considerable impact on the
environment (Zeshan and Muhammad 2011).
Many studies have carried out research to determine the impact of different resources of
electricity generation to GDP and one such clearly suggests that government needs to promote
renewable energy in order to lower the CO2 emissions and conserve environment (Abdul
Rehman 2019).
Boopen et al. research on the cognation among CO2 emissions and GDP in Mauritius for the
period 1975-2007 found a significant negative correlation. Shahbaz et al. research in the period
1972-2011 on the economy of Pakistan found positive correlation between renewable energy
consumption and income (GDP). Panel study on seven Asian countries- Pakistan, India, Syria,
Bangladesh, Jordan, Iran and Siri-Lanka between the periods 1985-2007 indicated direct
relationship in case of India, Pakistan, Syria and Iran and negative relationship for Bangladesh
and Jordan (Mahmoodi and Mahmoodi). Sardorsky’s research on G7 countries for the periods
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1980-2005 concludes that in long run, rise in real GDP per capital and carbon dioxide emissions
per capita are directly related to renewable energy consumption per capita. Menyah and Wolde-
Rufael research in the US for the period 1960-2007 found a positive correlation between nuclear
energy consumption and carbon dioxide emissions. Chien et al. researched on 45 countries
between the years 2001 and 2002, the research concluded that renewable energy consumption
increases economic wide technical efficiency whereas fossil fuel consumption reduces technical
efficiency. Similarly, a study of 116 countries by Chien at al. concluded that renewable energy
consumption leads to rise in GDP and capital formation. Uneb Gazder concluded in his research
on comparison between Saudi Arabia and Pakistan for energy consumption, that Pakistan’s
energy consumption is driven by its rising population and it is anticipated that by 2040,
population would become a serious threat to Pakistan’s economic development.
Another researcher, Stern (2000) claimed that power (energy) is indeed notable in expanding
GDP. Another research by Apergis and Payne (2010) claims to have experienced a long-time
correlation among GDP and natural gas consumption similarly in the real-capital(gross) and
capital accumulation. Equilibrium long time correlation among real coal consumption and GDP
was found using World Bank’s data on 88 countries for the period 1990-2006. However, for
Pakistan, Aqeel and Butt (2001) couldn’t determine a causal relationship between economic-
growth(real) (GDP) and gas utilization, however research data happens to be relatively old,
1956-1996. In fact, a relatively newer research by Siddiqui (2004), period 1970-2003 also claims
to have insignificant correlation among GDP and gas consumption but Khan and Ahmad (2008)
claims that the causal relationship between two variables does exist, at least in the long-run
according to their research with data from 1972-2007. Our hypothesis is also backed by a claim
in research by Chaudhry, Safdar and Farooq (2012) which claims that electricity and economic
growth are positively correlated whereas economic growth and oil utilization are inversely
related, as observed in Pakistan. Similarly, Shahbaz et al. (2013) also proved that natural gas
utilization and GDP growth (real) are positively related.
Theoretical Literature
The argument against the use of nonrenewable energy resources is strongly backed by the idea
that extraction of these resources causes significant damage to the local environment of those
places. Be it the drilling of Crude oil from the land surface in the desert, drilling oil from the sea
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bed in the Arabian Ocean or extracting Natural Gas from land. Citing the BP Deepwater Horizon
Spill incident that took place in 2010, the paper claims that all sorts of oil drillings, offshore and
onshore, has considerable environmental impact which is why businesses in this industry spend
enormous amount of money on Corporate Social responsibility (CSR) each year (Safia Seddiki
2018). Oil Rig explosions are quite common and when it happens, the fire continues to pump
enormous amount of CO2 emissions and black smoke into the air for hours. Even when
operations are ‘normal’, noises pollution and considerable traffic drives away the wildlife. This
is why we see the extinction rates going sky high for multiple land, sky and water creatures.
Natural gas industry is poplar for making claims on how modern natural gas power plants emit
roughly half the emissions relative to a coal plant. While this is true, the extracting and
transportation of natural gas is the real culprit when it comes to environmental harm and mind
you, it is a lot more damaging than the emissions from a burning coal plant. According to
UCSUSA (2014), the leakages from natural gas lines, which contain methane, is 34 times
stronger than the CO2 at trapping heat in the environment which means more contribution in
global warming. Another study of hydraulic fracturing impacts in region of Michigan found
significant potential environmental impacts which include soil erosion, wildlife habitat loss,
lowering ground water level.
Coming toward the main concern of this research, the effect created by contrasting resources of
energy on the GDP of different countries. The renewable energy utilization supposedly has an
inverse effect on Human development process similarly economic growth also reduces HDI
rating while environmental factors does lead to human development (Zhaohua Wang 2018).
Another study claims that energy utilization from renewable sources promotes economic growth
similar to nuclear energy consumption (partially renewable) whereas Oil consumption has a
negative impact on renewable energy consumption. Of course, consumption from one source
offsets another source’s consumption (Muhammad Luqman 2019).
Pakistan, being a fossils deficit country is in swear need of some alternate source of energy and
the most lucrative ones are definitely the renewable ones. Currently, Pakistan’s majority Oil for
consumption is imported that leads to current account deficit while thermal plants are damaging
the environment. The claims that Pakistan does have enormous potential for hydro, wind and
solar energy thanks to very dynamic landscape from North to South which if utilized efficiently
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would inject significant amount of electricity into the national grid (Mohammand Aslam Uqaili
2007).
Renewable energy is linked to sustainable development which generally is defined as current

consumption with no harm to future consumption. Two theories break down the sustainability
into three broad categories that all are equally important when making a sustainable decision.
The triangular and constant-capital approach describes three faces of sustainable development:
economic, social and environmental. Any sustainable policy must have its goal for the
betterment of all three dimensions. A policy must be such that it reduces pollution, reduces the
exploitation and consumption of natural resources and develop resilience which is the ability to
adapt to changes; all together it stabilizes and prospers the ecosystem. Secondly the policy must
be such that it improves the income level of people (purchasing power), this must translate in
better living standards. The diversified policy must try to reduce the consumption and
dependence on energy consumption. Lastly the economic and environmental up gradations must
come along with social betterment which includes better quality permanent jobs, higher literacy
rate, lower poverty, better health and generally a calmer and peaceful society.
While the triangular approach is top to bottom, another theory suggests that in order to truly
benefit from the renewable source and sustainable development, there must be a wider
acceptance for the policy and not just by few people. This means a bottom-to-top approach
where every stakeholder and those connected to them are accepting the policy for sustainable
development. This is known as the “procedural sustainability”.
It is clear that adaptation and prosperity of renewable energy consumption alongside the
sustainable development comes majorly from the local community. This argument has been
strengthened by Reddy et al. who did a research in northern Indian rural community. The motive
of this research was to breakdown the renewable energy source impact on local capital and to
develop an enduring structure: monetary, natural, communal, bodily and earthling. This
concluded apart from resource endowment, economic conditions and societal characteristics of
the regional community define the success ratio of renewable energy and sustainable
development. This is due to the fact that people need to adapt to the new form of energy, stop the
rural to urban migration, and work in the local community. This would promote and prosper the
local economy and lead to higher income and living standards.
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Another theory by El Bassam and Maegaard claims that renewable energy resource: biomass has
the largest potential to benefit rural farmers where there is abundance of animal dung alongside
free space to process that dung into gas production for burning.
Another interesting theory which explains the impact of renewable energy production on
employment states that there are two types of effects: expansion effect- which states that new job
opportunities arise from the development of parallel energy plants however this requires public
support in form of tax collection. The other one is the contraction effect-this states that
renewable energy resources are mostly very capital intensive and generate negative economic
profits in starting phases; this raises the overall electricity cost which translates into higher
electricity prices for consumers who then demand less of electricity. This results in layoffs in the
energy sector. This has been experienced in Germany where there were 33,000 new jobs created
in the expansion phase but as the temporary phase faded, there were 6000 jobs lost in around 6
years’ period.
A lot of emphasis has been made on the ‘stakeholders’ analyses’ for renewable energy
production. This asks for a thorough study of benefits and costs for each party who is directly or
indirectly getting impacted by the policy. These stakeholders include local population, local
NGOs, local government, federal government, the renewable energy project and its workers,
investors, environment and other parties outside the region. The emphasis is on local community
and economy because that is where majority of the socio-economic impact is made. While taking
a broader audience into consideration we move beyond the scope of substantive sustainability-
economic, societal and environmental; and towards the procedural sustainability.
Quantitative approaches when used to measure the success of renewable energy project,
generally revolves around the number of jobs created done with the spreadsheets-analysis.
Another model is the input-output approach measures the direct as well as indirect job creations
resulting from the project.
A recent study planted the solar and wind energy into the most famous game theory and analyzed
the different economic outcomes with different approaches: collusion, separate production and
then cheating. The conclusion was that renewable energy resources, especially wind and solar,
would maximize economic profits and outcome if working in series. That is if energy is
produced from wind and then by sun the outcome is maximized.
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Empirical Literature
For this study, I will be categorizing the independent variables, the different sources of energy,
into two broad categories in order to simply the equation and hypothesis and to strengthen the
argument. These categories are non-renewable and renewable energy resources. Under the
category of renewable energy resource, we would be having Hydroelectric power, Wind power,
Geo-thermal energy, and solar power and might also add Bio-mass energy because of its
significant contribution in Pakistan’s pastoral regions of these countries. Non-renewable energy
resources include Coal, Crude Oil, Nuclear (particularly Uranium based), Natural Gas and other
sources such as (LPG), (CNG) and (LNG) all of which are forms of natural gas.
I will also be referring to other macro-economic variables which, while not being part of
regression equation and main hypothesis, would help understand the general trend and would
strengthen the argument. These variables include: Human Development Index (HDI), Trade
(particularly exports), Oil prices, Cost of electricity from different sources of energy, efficiency
rating of energy production, poverty index, pollution index, CO2 emissions etc.
With rise in electricity production, it is clear that output would naturally increase and GDP
would rise. The relation is as follows: Rise in energy production raises GDP which raises CO2
emissions (Raheel Zeb 2014).
Many existing researches have already established the relationship between lower CO2
emissions and renewable energy production as Boopen et al.
Then the panel researches by Abdul Rehman (2008) and Ateeq (1998) have also shown that
renewable energy production greatly impacts the GDP especially in case of developing countries.
By consulting existing literature, there are two conclusions that I am sure of: (1) non-renewable
energy production and consumption, especially coal and oil, has a significant adverse impact on
environmental degradation by CO2 emissions. (2) Renewable energy promotes GDP growth, at
least in long-run. These arguments are sufficient to prove that there is dire need to replace non-
renewable energy production with renewable resources and secondly in case of Pakistan, the
electricity production has to be considerably increased in order to avoid being at risk of energy
shortages.
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My research scope is relatively advance then the existing research because I’d be studying the
comparative effect of different sources of energy on economic growth (GDP) across different
countries in different regions of the world. This would allow us to conclude which specific
source of renewable energy is the most effective at promoting economic growth so that scarce
resources could be utilized in the most efficient possible way. This means policy maker would be
better able to predict the equilibrium between electricity consumption and production since
energy shortage (per capita) is among the greatest threat to the economy of Pakistan which is the
fastest energy demanding country among the South Asian region. I will not be including the
environmental degradation such as CO2 emissions in the regression equation since it is beyond
the scope of my research however relevant statistics would be mentioned in order to make better
comment on the economic conditions. These variables may include HDI, poverty index,
electricity output, electricity price etc.
Theoretical Framework
Data
The subject of this study is to see if utilization of different energy resources makes any
difference in terms of economic growth and GDP. The study is intended to help the South Asian
region mainly because majority of the countries in the specified region are developing countries
with limited resources or capital to extract those resources thus exiting energy needs are heavily
dependent upon imported fuel.
I intend build two different broad categories of the resources: renewable- those with minimal to
none impact on the consumption of future generations and the environmental degradation, and
the non-renewable- those which are scarce in nature and greatly impact the environment in
inverse matter. These categories would be including the independent variables- different sources
of energy, but would be tested as in a combined regression test.
Data would be collected at the national level since the dependent variable is GDP/ economic
growth. A wide time window would be used, estimated to be between 2000-2019 thus it would
be a time-series data.
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This study intends to empirically test the effect of energy utilization from different resources on
the economic growth of countries across multiple continents. These countries are Argentina,
Australia, Austria, Bangladesh, Belgium, Brazil, Canada, China, Czech Republic, Denmark,
Finland, France, Germany, India, Italy, Japan, Mexico, Netherlands, Norway, Poland, Russia,
Spain, Sweden, Switzerland, Thailand, Turkey, United Kingdom, United States of America and
Uruguay.
All the sources for data and information are secondary and primarily include data from the
published books of Bureau of Statistics, The World Bank, Institute of Development, State Bank,
International Energy Agency, Water and Power Development Authority (in case of Pakistan), the
energy distributary authorities in Pakistan- PEPCO, LESCO, MEPCO and FESCO etc., K-
Electric, the Individual Power Producers (IPPS), Ministry of Energy. To complement the data,
reports and analysis from published blogs and articles online might also be used. Equivalent
authorities and data management institutes would be approached for other countries in the study.
The Elements of research design include purpose of study: to determine the impact of
consumption and production of renewable energy resources and compare it to that of non-
renewable resources of energy, extent of researcher interference: Since all the material is
collected from published data online or offline there is minimal interference by the researcher
and the study is to be conducted in natural flow of events. The study setting is non-contrived
because of its minimal interference by the researcher and is a field study type and the research
strategies are as follows: as described earlier, it’s a purely secondary type of research and data
sources include data from Government authorities, World Bank and complimented by Market
reports. Unit of Analysis is country-level since dependent variable is GDP. With wide time
window, 2000-2019, and multiple countries, the study can be categorized as longitudinal panel
which is the time horizon for the study.
Empirical Estimation
These are the primary variables that I would be including in the regression equation which is as
follows:
GDPi=β0+β1Oilit+β2Gasit+β3Coalit+β4Neuclarit+β5Hydroit+β6CombinedNonRenwableit+β7Com
binedRenewableit+β8Tradeit+β9Urbanizationit+β10Pollutionit+β11Heathexpit+ε
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Oil: Electricity production from Oil sources
Gas: Electricity production from natural gas sources
Coal: Electricity production from Coal sources
Neuclar: Alternative and Nuclear energy consumption
Hydro: Electricity production from hydroelectric sources
CombinedNonrenewable: Electricity production from Oil, Gas and Coal sources
CombinedRenewable: Renewable electricity output
Trade: Trade as percentage of total GDP
Urbanization: Urban Population
Pollution: Air pollution level
Healthexp: Health Expenditure as percentage of total GDP
Economic growth is to represented by the Gross Domestic Product (GDP) adjusted for inflation
so the dependent variable to be used is real GDP. It is the monetary value of all the produce in a
geographical boundary of a country in a particular year, adjusted for the cost of inflation- rise in
prices, and is to counted in USD $. The independent variables are the two categories of energy
resources: sustainable renewable and the non-renewable, the categories then include different the
actual variables.
Starting off with the energy resource with largest utilization in Pakistan, Oil, this is a non-
renewable source of energy with significant CO2 Emissions. Most of the power plants are owned
by individual business groups and corporations and are majorly utilized for private consumption
while surplus energy is injected into the National grid. Because energy production is directly
correlated with output and growth, irrespective of environmental damage and long-term gains,
Oil consumption (β1) is positively correlated with GDP and our unit for measurement would be
Gigawatt (GW) while input is measured as crude oil (billion barrels).
Next most significant contributor to energy production is from Natural Gas, again a non-
renewable resource but since its available in abundance locally, it is utilized at mass scale.
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Again, the expected sign for Gas (β2) is positive with GDP and unit of measurement is Gigawatt
(GW) and input as (trillion cubic feet-TCF).
The energy produced from Coal is the third most significant variable in non-renewable energy
production category in Pakistan. One thing important of consideration is that coal power plants,
while being deemed obsolete all around the globe, are very new form of energy production in
Pakistan and all the mentioned plants have been completed and made operational after 2017. The
correlation for coal energy (β3) with GDP is positive and unit of measurement is Gigawatt (GW).
The Nuclear power plants are very less popular and concentrated in few places in case of
Pakistan. The expected sign for Nuclear energy (β4) is also positive for GDP and unit of
measurement is Gigawatt (GW).
Under renewable sources of energy which are sustainable and ecofriendly, most significant
variable is the hydroelectric energy. Hydroelectric energy that is the energy produced using
mechanical energy of flowing water. This is in high priority because Pakistan’s has many hydro-
electric plants and produces a lot of energy from them when speaking of only the non-renewable
category. The unit of quantification would be the energy produced from it in Gigawatt (GW) and
the expected correlation for hydro-energy (β5) with GDP is positive.
As can be seen in the regression, both renewable and non-renewable energy resources are
combined in a single string because I’ll be calculating the correlation between dependent and
independent variables in a single regression equation.
Although all types of energy consumptions generally lead to a higher output (GDP), our main
hypothesis is to test whether the renewable energy resources lead to a marginally higher GDP
growth then the non-renewable energy resources or not.
Although all the signs are expected to be positive since we know that higher energy consumption
leads to higher output, what we intend to test is either renewable energy resources perform
marginally better or not. The definitions for all the variables have been taken from the site
Energypedia.info
Other variables that will be discussed alongside in the paper are Human Development Index
(HDI)- the overall life quality of people which is expected to have a positive sign in regression
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equation and the unit for measurement would be the index value as reported by the authorities.,
Trade- the positioning of these countries globally in terms of exports measured in billions of
USD it is also expected to have a positive sign, Urbanization-the impact of energy use in
movement between rural and urban settings within the country measured as number of people
moving towards a urban setting in a given period and expected sign is positive, the general price
level of Electricity for household and firms measured in CPI USD this variable is expected to
have a negative sign since higher energy production leads to cheaper electricity, the pollution
index at different levels of energy utilization measured with an index rating published it is
expected to have a negative sign because non-renewable energy production has significant
pollution output, the poverty index as published by the authorities with an expected sign negative
sign since lower electricity cost leads to higher output/income, the air quality index published
with a negative sign similar to pollution index and the health expenditure by the government is
expected to have a positive sign because more pollution leads to worse health conditions. These
are the control variables for our regression equation.
Other than the variables, there are subscripts “i” and subscript “t” in the equation. The “i”
subscript represents the unit of analysis which I’ve already told is country-level data while “t”
subscript represents the particular time in the general time window used for this research.
Lastly, we have “ε” as the error term which could include all those variables that we intend not
to be tested using the regression equation but could make an impact on the dependent variables
in one way or another.
Hypothesis
Our only intention is to test whether renewable energy resources do any better as opposed to
conventional non-renewable resources when it comes to economic growth for a country. Our
hypothesis is based on the very same principle that since renewable energy resources are
environment friendly and sustainable, these sources of energy does perform better, at least in the
long-run.
o H0: Null Hypothesis
 Renewable energy does not have greater impact then non-renewable energy on
GDP
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 Β1<0
o H1: Alternate Hypothesis
 Renewable energy has greater impact on GDP relative to non-renewable energy
 Β1>=0
Data Descriptive
Table 1: Varialbe Definitions
Variable Name Variable Label Source
GDP GDP (current US$) World Development Indicators (WDI)
Oil Electricity production from oil sources World Development Indicators (WDI)
(% of total)
Gas Electricity production from natural gas World Development Indicators (WDI)
sources (% of total)
Coal Electricity production from coal sources World Development Indicators (WDI)
(% of total)
Neuclar Alternative and nuclear energy (% of World Development Indicators (WDI)
total energy use)
Hydro Electricity production from hydroelectric World Development Indicators (WDI)
sources (% of total)
CombinedNonRenewable Electricity production from oil, gas and World Development Indicators (WDI)
coal sources (% of total)
CombinedRenewable Renewable energy consumption (% of World Development Indicators (WDI)
total final energy consumption)
Trade Trade (% of GDP) World Development Indicators (WDI)
Urbanization Urban population World Development Indicators (WDI)
Pollution PM2.5 air pollution, mean annual World Development Indicators (WDI)
exposure (micrograms per cubic meter)
Healthexp Current health expenditure (% of GDP) World Development Indicators (WDI)
Correlation Matrices
Table 2: Matrix of correlations (Overall)
Variables (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11)
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(1) gdpcur 1.000
(2) coal 0.252 1.000
(3) hydro -0.188 -0.510 1.000
(4) gas -0.057 -0.236 -0.418 1.000
(5) oil -0.086 -0.237 -0.005 0.256 1.000
(6) 0.149 0.604 -0.738 0.608 0.204 1.000

combinednonrenew
(7) euneuclar -0.064 -0.479 0.425 -0.539 -0.286 -0.862 1.000
(8) 0.608 0.439 -0.094 -0.137 -0.030 0.255 -0.258 1.000

urbanpopulation
(9) healthexpper 0.431 -0.197 0.182 -0.384 -0.174 -0.488 0.453 -0.189 1.000
(10) tradepergdp -0.359 -0.036 -0.145 -0.025 -0.312 -0.113 0.184 -0.399 0.057 1.000
(11) pollutionkt 0.773 0.431 -0.153 -0.126 -0.111 0.240 -0.194 0.897 0.014 -0.317 1.000
The table above shows the correlation between all the variables in overall data (Developing and
Developed countries collectively). We can see that GDP is negatively correlated with the
majority of the variables such as hydro-electric, natural gas, oil and nuclear. Only the electricity
production from coal seems to be positively correlated with the GDP. Other than these, urban
population and, health expenditure and pollution are also positively correlated which was as
expected. Trade surprisingly has a negative relationship with the GDP.
Table 2.1: Matrix of correlations (Developing, Countries)
Variables (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11)
(1) gdpcur 1.000
(2) coal 0.130 1.000
(3) hydro -0.216 -0.581 1.000
(4) gas 0.210 -0.000 -0.439 1.000

17
(5) oil 0.089 -0.025 -0.170 0.411 1.000
(6) 0.227 0.811 -0.723 0.571 0.327 1.000

combinednonrenew
(7) euneuclar -0.131 -0.685 0.492 -0.574 -0.308 -0.897 1.000
(8) 0.942 0.140 -0.204 0.222 0.211 0.257 -0.166 1.000

urbanpopulation
(9) healthexpper 0.745 -0.281 0.050 0.124 -0.176 -0.189 0.167 0.638 1.000
(10) tradepergdp -0.504 -0.127 -0.010 -0.026 -0.375 -0.167 0.093 -0.565 -0.194 1.000
(11) pollutionkt 0.948 0.208 -0.198 0.151 0.073 0.257 -0.175 0.932 0.686 -0.478 1.000
Table 2.1 shows the overall correlation for segregated data of developing countries only. One
difference that we can observe from the overall results is that more variables are positively
correlated. Natural gas electricity production, oil-based electricity production and combined non-
renewable energy production are all positively correlated to the GDP of these countries.
Pollution, health expenditure and population growth at urban settings is similar to the overall
results.
Table 2.2: Matrix of correlations (Developed Countries)

Variables (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11)
(1) gdpcur 1.000
(2) coal 0.566 1.000
(3) hydro -0.083 -0.366 1.000
(4) gas -0.379 -0.440 -0.619 1.000
(5) oil -0.271 -0.405 0.073 0.004 1.000
(6) 0.062 0.374 -0.982 0.630 -0.077 1.000

combinednonrenew
(7) euneuclar -0.050 -0.375 0.944 -0.584 0.029 -0.967 1.000
(8) 0.837 0.856 -0.138 -0.553 -0.323 0.142 -0.175 1.000

urbanpopulation
(9) healthexpper -0.088 -0.447 0.811 -0.468 0.281 -0.837 0.810 -0.217 1.000
18
(10) tradepergdp -0.145 0.037 -0.392 0.371 -0.081 0.401 -0.375 -0.193 -0.386 1.000
(11) pollutionkt 0.910 0.729 -0.181 -0.417 -0.316 0.165 -0.137 0.912 -0.199 -0.085 1.000
In the correlation matrix for segregated developed countries only, an opposite relationship can be
found for the energy productions such as hydro-electric, gas based and oil based are all
negatively correlated to the GDP of developed nations. Surprisingly the health expenditure and
trade are also negatively correlation which I feel might be due to the U-shaped backward
bending relationship for such variables.
19
Descriptive Summary Statistics

Table 3: Summery Statistics (Overall)
Variable Mean Std.Dev. Min Max Observation

s
coal overall 26.299 25.777 0 96.331 N = 580
between 1.747 23.906 28.968 n = 20
within 25.720 -2.669 93.662 T = 29
hydro overall 23.134 27.020 0.037 99.514 N = 580
between 1.117 21.990 25.698 n = 20
within 26.998 -2.481 99.545 T = 29
gas overall 23.938 23.306 0 92.697 N = 580
between 1.522 20.797 26.841 n = 20
within 23.258 -2.176 91.924 T = 29
oil overall 4.199 6.462 0.006 45.508 N = 580
between 0.862 3.110 6.019 n = 20
within 6.407 -1.813 43.688 T = 29
combin~ w 54.436 31.045 0.128 98.878 N = 580

overall
between 2.319 50.770 57.201 n = 20
within 30.962 -2.336 102.439 T = 29
euneuc~ r overall 13.334 12.931 0.106 49.590 N = 580
between 0.336 12.732 14.047 n = 20
within 12.927 -0.559 48.878 T = 29

20
Table 3.1: Summery Statistics (Developing Countries)

s
coal overall 28.122 25.066 0 96.331 N = 380
between 2.766 24.473 32.311 n = 20
within 24.921 -4.190 92.347 T = 19
hydro overall 21.185 27.346 0.037 99.514 N = 380
between 0.690 20.087 22.772 n = 20
within 27.338 -1.503 99.741 T = 19
gas overall 17.346 15.880 0.148 63.162 N = 380
between 1.610 14.912 20.506 n = 20
within 15.802 -1.912 60.002 T = 19
oil overall 2.569 4.151 0.006 31.814 N = 380
between 0.995 1.614 4.278 n = 20
within 4.036 -1.692 30.273 T = 19
combin~ w 48.037 30.764 0.205 98.480 N = 380

overall
between 3.716 42.696 53.011 n = 20
within 30.549 -4.542 95.226 T = 19
between 0.512 16.579 18.459 n = 20
within 13.972 -0.126 48.943 T = 19

21
Table 3.2: Summery Statistics (Developed Countries)

s
coal overall 22.835 26.798 0 80.954 N = 200
between 0.422 21.671 23.391 n = 20
within 26.795 -0.556 80.665 T = 10
hydro overall 26.838 26.057 0.959 99.429 N = 200
between 2.976 23.225 31.967 n = 20
within 25.894 -1.117 95.473 T = 10
gas overall 36.462 29.316 0 92.697 N = 200
between 1.710 31.978 38.878 n = 20
within 29.268 -1.708 93.268 T = 10
oil overall 7.295 8.602 0.128 45.508 N = 200
between 1.181 5.338 9.645 n = 20
within 8.524 -1.901 43.158 T = 10
combin~ w 66.593 27.838 0.128 98.878 N = 200

overall
between 1.711 63.372 70.147 n = 20
within 27.788 2.445 99.256 T = 10
between 0.337 4.826 6.301 n = 20
within 4.755 -0.436 21.433 T = 10
T
22
hese three tables above; table 3, 3.1 and 3.2 are the summery statistics for overall data,
segregated developing and developed nations respectively. We are presented with Means,
Standard deviations and the ranges both within the individual variables and also across them.
The range and standard deviations are very volatile and vary quite a lot which I believe is a
reason for the inclusion of different types and sizes of economics. We have both, super rich
economics which are very concerned about the use of resources and their impact on the
environment and then we have poor economically struggling nations which are more concerned
with the output then its impact on the environment.
The data ranges are classified as either ‘between’ or ‘within’. These depicts the
changes/differences across different countries and different time periods for same country,
respectively.
The mean GDP of developed nations is significantly higher than that of the developing countries,
which is of no surprise. Developing countries also tend to produce more energy from the
renewable sources relative to developing countries and in result, developing countries are more
damaging to the environment as well. The urban population growth and impact on trade of GDP
is also significantly stronger in the developing countries. Values vary between 20.45667 to
35.6554 within and nearly double for between.
23
Table 4: T-Tests for Variables with Dependent Variables

Variable Absolute T-value
GDP 13.65
Coal 24
Hydro 20
Gas 23.85
Combinednonrenew 41.55
euneuclar 24
urbanpopulation 12.85
healthexpper 70.6
tradepergdp 48.2
pollutionkt 11.35
The above table is the summery of all t-values, in absolute numbers, for all the variables. All the
values are generally significant which means that means for developing and developed countries
are very different form each other. The relationship gets weaker for urban population and
pollution levels however it is still strong enough to be considered as significant.
24
Graphs and Charts

Fig 1.1: GDP distribution frequency This table shows the same frequency
distribution for coal energy production. The
400
frequency falls as the consumption rises.

300
Fig 1.3: Hydro-electric consumption

distribution frequency
Frequency
200 100
0
0 5.0e+12 1.0e+13 1.5e+13 2.0e+13

GDPcur
200
The table above shoes the distribution of 150
GDP as frequency distribution and we can

Frequency
see that for almost all the countries in data,

100
this falls near the lower bound range.

50
Fig 1.2: Coal consumption distribution

frequency
0
0 20 40 60 80 100
hydro
For hydro-electric consumption, the data is

distributed differently as developed
countries tend to have higher numbers and
developing has very low, in result the graph
150
is not very even.

100
Fig 1.4: Natural gas consumption

Frequency
50
0
0 20 40 60 80 100
coal
25
as mentioned earlier of discrepancies in
150
countries use of non-renewable sources.
Fig 1.6: Combined Non-renewable

100
Frequency
consumption distribution frequency

50
0
0 20 40 60 80 100
gas
60
Lastly the gas consumption frequency is
negatively sloping: the frequency of
observations in data falls as coal
40
Frequency
consumption rises. This is because we have
a lot of developed nations in our data which 20
do not use much coal for energy production.

0
Fig 1.5: Oil consumption distribution 0 20 40 60

combinednonrenew
80 100
frequency
By combining the non-renewable resources,
a very different picture can be seen: higher
values are related to higher frequencies.
Fig 1.7: Nuclear energy consumption

300200
Frequency
100
0
0 10 20 30 40 50
oil
Oil frequency is very similar to that of coal

and the same relationship can be concluded
26
100
Fig 1.9: Health expenditure distribution

80
frequency
60
Frequency
40 20
0
0 10 20 30 40 50
euneuclar
80
Nuclear energy production is higher in the
60
developed nations as technology is not
Frequency
available with the developing countries. This
40
relationship can also be seen in the
20
frequency distribution.
Fig 1.8: Urban population distribution

0
0 5 10 15 20
healthexpper
frequency
Health expenditure, although is positively
related to the GDP, varies significantly
across different countries. This is because
developed countries can afford to spend a lot
more relative to the developing countries.
400
Fig 1.10: Trade level distribution

300
frequency
Frequency
200
100
0
0 1.0e+08 2.0e+08 3.0e+08 4.0e+08

urbanpopulation
The urban population is not very different

across countries and this can be seen also in
the frequency distribution closer to 0.
27
significantly related to GDP in both types of
60
economies.
Fig 2.1: Hydro-electric consumption as

40
Frequency
percentage of total
20
hydro
Developing Developed
0
0 50 100 150 200

tradepergdp
Trade as percentage of GDP is neither close

47%
to 0 nor 100, this means it falls in the normal 53%
distribution frequency.
The pie charts are for a visual depiction of

how data for each variable is distributed
across different types of countries:
Fig 1.11: Pollution level distribution
Developed and Developing. Hydro electric
frequency
energy is more found in developing
countries relative to developed countries.
Fig 2.2: Gas consumption as percentage

of total
400
gas
300
Frequency
200
31%
100
69%
0
0 2.0e+06 4.0e+06 6.0e+06 8.0e+06 1.0e+07

pollutionkt
Gas again is significantly more consumed in

Lasty, we have a graph for the pollution
developed countries relative to developed
levels frequency. The close to 0 and very
nations.
high level of frequency means pollution is
28
Fig 2.3: Combined non-renewable energy Fig 2.5: Trade per capita as percentage of
consumption as percentage of total total
combinednonrenew tradepergdp
Developing Developed Developing Developed
37%
39%
63%
61%
Trade levels are also higher for the

The overall combined non-renewable energy developed counties as expected from the
distribution shows that the developing relationship in income and output of
countries use more of such energy. economies.
Fig 2.4: Nuclear consumption as Fig 2.6: Pollution level as percentage of

percentage of total total
euneuclar
24%
76%
As explained earlier, developed countries

has better technology which they use to reap
energy out of nuclear sources.
29
pollutionkt coal
25%
48%
52%
75%
Because developing countries use more of Strangely enough, coal energy use is shown
the non-renewable sources for energy to be higher for the developed countries
production, the pollution is also significantly which was falsified in regression, this might
higher in developing countries relatively. be due to the fact that we have greater
number of developed countries in our data
Fig 2.7: GDP as percentage of total
set.
GDPcur Fig 2.9: Oil consumption as percentage of
total
oil
51% 49%
20%
GDP is evenly distributed in the data set 80%
however the developed countries show a

Oil and gas are among the most consumed
higher level of GDP which can also be seen
sources of electricity production in
in the graph above at slight.
developing countries which can also be seen
in the graph.
Fig 2.8: Coal consumption as percentage
of total
Fig 2.10: Urban population growth as
percentage of total
30
urbanpopulation healthexpper
17%
36%
64%
83%
Urban population growth in very high in

Lastly, as I have already discussed earlier,
developing countries as people are
the developed countries spend a lot more
continuously moving too richer settlements
money non the health of its aging population
for better work opportunities.
relative to developing countries with low
expectancy.
Fig 2.11: Health expenditure as

percentage of total
Regression Results
Table 1: Overall Hausman
Overall Hausman for both developed and developing countries is 0.0000, which is significant,
which supports Fixed Effects (FE)
Table 1.1: Overall Time Fixed Effects
Overall Time Fixed is significant i.e., less than 0.05, Time Fixed Effect need not to be used as
there is no need to incorporate time dummies in the regressions.
31
Table 1.2: Overall Heteroscedasticity
Overall Heteroskedasticity is present in both developed and developing countries so we have to

robust the data.
Table 1.3: Overall Serial Correlation
Overall, serial correlation is significant as it is less than 1%. This could be due to various factors.
Firstly, there was a time constraint due to many missing values in the data. Secondly, no
instrumental variable was used which might have caused the result to be significant. Thirdly,
there are chances of reverse causality, whereby it is possible that dependent variable might have
caused an effect on the independent variable.
32
Table 1.4: Regression Results (Overall)
33
Column 1 represents Overall Fixed Effect Model. It consists of collective regression for both
developed as well as developing countries. Since the Hausman regression results were significant
i.e., less than 0.05, the model suggested Fixed Effects (fe). Column 2 represents Overall Time
Fixed Effects. The results were significant, so there was no need to create dummies for Overall
Fixed Effects. Column 3 represents Fixed Effects with Robust. The results of overall
Heteroscedasticity, were significant i.e., 0.0000, so there was a need for generating robust. The
results show that 1% rise in coal consumption in million metric tons decreases GDP by
-5.606e+10, at 1% significance level, keeping all other variables constant. This is also supported
by the Aqeel and Butt (2001) for Pakistan. However, many other energy resources proved to be
insignificant up to 10% that include hydro-electric power production as percentage of total,
natural gas power production as percentage of total, electricity production from oil as percentage
of total, nuclear energy as percentage of total energy use, renewable energy output as percentage
of all electricity output. For hydro-electric (John Keldellis 2011) and (Mohammad Aslam Uqaili
2007) supported the effect on GDP but our research proved insignificant in this case.
Among these Oil, Nuclear and renewable energy output showed a negative relationship with
GDP. A 1% rise in urban population proved to rise the GDP by 92,883 at 1% significant level.
Health expenditure rises GDP by 2.338e+11, if increased by 1% as proved with regression
significant at 1%. However, pollution level would reduce GDP by 534,056 if increased by 1%
again validated at 1% significance level, backed by (Safia Seddiki 2018) and (Raheel Zeb 2014).
Lastly trade (as percentage of GDP), if increased by 1%, would reduce GDP current by
7.061e+09 at 5% significance level.
Developed Countries
Table 2: Segregated Hausman for Developed countries
Segregated Hausman for developed countries is less than 0.05, which is significant; hence, it
supports Fixed Effects (FE)
34
Table 2.1: Segregated Time Fixed Effects for Developed Countries
Time Fixed Effect for developed countries is significant i.e., less than 0.05, however Time Fixed
Effect need not to be used as there is no need to incorporate time dummies in the regressions.
Table 2.2: Segregated Heteroscedasticity in Developed countries
Heteroskedasticity is present in developed countries so we have to robust the data.
Table 2.3: Segregated Serial Correlation for Developed countries
Segregated serial correlation for developed countries is significant as it is less than 10%. This
could be due to various factors. Firstly, there was a time constraint due to many missing values
in the data. Secondly, no instrumental variable was used which might have caused the result to
be significant. Thirdly, there are chances of reverse causality, whereby it is possible that
dependent variable might have caused an effect on the independent variable.
35
Table 2.4: Regression Results (Developed Countries)
36
Hausman supported FE for segregated developed and developing countries as well, as the results
were significant (smaller than 0.05). Column 1 represents regression results of FE for developed
countries. Results for developed countries is significant i.e., smaller than 0.05, therefore, Column
2 represents Time Fixed Effects incorporated for developed countries. Column 3 represents
Fixed Effects Robust for developed countries as results for Heteroscedasticity for developed
countries came out to be significant i.e., 0.000. Unlike the overall results earlier, hydro-electric
power production and nuclear energy significantly effects the GDP current level of developed
countries when tested at 5% significance level. A 1% rise in hydro-electric power production per
million kilo watts reduces GDP current level by 1.837e+10, other variables held constant, similar
to 2014 (Zhaohua Wang 2018). The nuclear energy production however rises the GDP by
3.141e+10 when increased by 1% which is also proven by Menyah and Wolde-Rufael in case of
the USA. Contrary to overall regression, the trade (as % of GDP) increases the level of GDP for
developed countries by 4.420e+09 when increased by 1%, tested and proven significant at 5%
significance level (Mahmoodi and Mahmoodi).
The Time Fixed regression effect show a slightly different story. Only the electricity production
from natural gas is significant that being at 10% test which shows a positive correlation, rise in
GDP of 1.385e+10 with a rise in electricity production from natural gas by 1%. This is also
backed by existing panel research on 45 countries by Chien et al.
The last column is for Robust Fixed regression effect and only the urban population is significant
with positive correlation with GDP. A 1% rise in urban population is predicted to rise the GDP
by 350,071 all else equal and this is tested at 1% significance also proven by (Uneb Gazder).
Developing Countries
Table 3: Segregated Hausman for developing countries
Hausman for both developing countries is 0.0000, which is significant; hence, it supports Fixed
Effects (FE)
37
Table 3.1: Segregated Time Fixed Effects for Developing Countries
Time Fixed Effect for developing countries turned out to be insignificant i.e., greater than 0.05,
hence Time Fixed Effect need not to be used as there is no need to incorporate time dummies in
the regressions.
Table 3.2: Segregated Heteroscedasticity in Developing countries
Heteroskedasticity is present in developing countries so we have to robust the data.
Table 3.3: Segregated Serial Correlation for Developing Countries
Segregated serial correlation for developing countries is significant as it is less than 10%. This
could be due to various factors. Firstly, there was a time constraint due to many missing values
in the data. Secondly, no instrumental variable was used which might have caused the result to
be significant. Thirdly, there are chances of reverse causality, whereby it is possible that
dependent variable might have caused an effect on the independent variable.
38
Table 3.4: Regression Results (Developing Countries)
39
Column 1 represents regression results of FE for developing countries. Results for developed
countries is significant i.e., smaller than 0.05, therefore, Column 2 represents Time Fixed Effects
incorporated for developing countries. Column 3 represents Fixed Effects Robust for developing
countries as results for Heteroscedasticity for developing countries came out to be significant i.e.,
0.000. Much like earlier, hydro-electric power production and nuclear energy significantly
effects the GDP current level of developing countries when tested at 10% and 5% significance
level respectively. A 1% rise in hydro-electric power production per million kilo watts reduces
GDP current level by -2.179e+10, other variables held constant proven by Abdul Rehman (2008)
and Ateeq (1998). The nuclear energy production however rises the GDP by 1.206e+11 when
increased by 1%. Contrary to overall regression, the trade (as % of GDP) reduces the level of
GDP for developing countries by 2.344e+10 when increased by 1%, tested and proven
significant at 1% significance level.
The Time Fixed regression effect show a slightly different story. Electricity production form coal
proved to have a reducing impact on GDP of 1.620e+11 with each incremental 1% production
tested at 1% significance. Nuclear energy, urban population and trade (% of GDP) also proved to
be significantly tested (Boopen et al.) and (Raheel Zeb 2014).
The last column is for Robust Fixed regression effect where the electricity production from
hydro sources had an inverse impact on GDP of developing countries. E.g., 1% rise in electricity
production from hydroelectric sources reduces GDP current by 2.179e+10 tested at 10%
significance level. Nuclear energy, Urban population and trade all proved to be significant much
like in time fixed effect.
Relevance and Contribution

Most of the developing countries are resource scare and immense pressure from population
growth, always are in deficit of resources, irrespective of huge import bill every year. Almost all
of the energy production locally is done using super expensive imported oil. Remaining of comes
from natural gas and coal because of which household consumption and environment suffers
respectively. Secondly continuously depreciating currency, budget deficit, general price level
rise and uncertain oil supply globally, all of these factors combined make it a lot more difficult
for these nations to fulfill the energy needs.
40
This research has tried to explain whether bringing in renewable energy resources and promoting
them to bigger scale would do any good to the national economic growth. It is difficult to say if
renewable energy resources would have a larger impact on GDP growth as opposed to non-
renewable/ conventional resources however one thing is quite clear that renewable resources
would significantly help improve environment since all these methods have minimal carbon
emissions, do not product any by-wastes that could damage the environment and lastly are
sustainable which means consumption from them do not reduce the availability for future
generations. All these factors are very important for developing countries in order for them to
have a higher growth rate so this is why I believe this very research is very relevant to
environment and has a wider scope.
The existing researches are either relatively old, 1980s and before, or are covering a different
aspect of the topic such as environmental degradation, energy consumption and economic
growth, potential of biomass etc. In this research I have combined all sources of energy and
compare them side-by-side to be the impact and significance they carry on the output of the
economy (GDP).
Because theories and their implications different between developing and developing countries
as per their economic dynamics, the comparative analysis talk about how the polices must differ
in accordance with the results of research.
Conclusion and Policy Implications

Regression tests have been conducted to see the correlation strength between GDP growth and
energy production/consumption across developing and developed countries segregating the
effect of renewable and non-renewable energy sources. For developing countries, hydro electric
energy production came out to be negatively affecting the GDP as 1 unit rise in hydro-electric
production tested out to reduce GDP by 21,790,000,000 dollars in current terms. Electricity
production from nuclear sources resulted in a positive 12,060,000,000 rise in GDP for each
incremental unit of electricity production. Other sources of energy production; coal, gas and the
non-renewable, came out to be insignificant however positively effecting GDP. Other variables,
that are included in the regression equation, such as urban population has been very significant in
the correlation results with 1 unit rise in urban population, GDP growing by 58,818 dollars
41
(current). Pollution also showed a similar trend, as 1 unit rise in pollution would increase the
GDP of developing counties by 205,875 dollars. The international trade (as percentage of GDP)
however showed a very unexpected result, 1 unit rise in trade would reduce GDP by
23,440,000,000. For developed countries, the results came out to be slightly different. Again,
coal consumption’s effect on GDP is positive, however insignificant below 10%, but hydro-
electric energy consumption is negatively effecting GDP as 1 unit rise in energy consumption
would result in a 18,370,000,000 dollar fall in GDP, tested at 5% significance level. Gas, Oil and
combined renewable energy production came out to be insignificant. Nuclear energy production
results in a 31,410,000,000 dollar rise in GDP, for each incremental unit of energy production,
which is very significant. Urban population growth also effects the GDP positively as 1 unit rise
increases GDP by 350,071 dollars (current). International trade is completely opposite in case of
developed nations as 1 unit rise in trade results in a 42,200,000,000 dollar rise in GDP as
opposed to a negative growth in case of developing nations. Pollution and health expenditure are
tested to be insignificant.
Developing countries, such as Pakistan, India, Bangladesh and China in South Asia or Argentina
in Europe are very resource hungry as such countries are continuously leap-frogging and need
immense number of resources to do so. In order to fuel this growth, irrespective of the effect of
different energy sources on GDP, the governments must move from non-renewable to the
renewable energy sources which not only are in abundance but are significantly cheaper in the
long-run too. The projected fall in the stock piles of non-renewable fuels such as coal, gas and oil
are very fast paced which means the nations would be forced to move towards other sources of
energy even if they do not intend to. Pakistan and India have immense amount of downward
flowing water in its river system and not even half of it has been utilized for energy production.
By diverting more assets toward the development of Dams and hydro-electric plans, a lot of this
wasted energy could very well be utilized. Similarly, the Thar and Baluchistan region of Pakistan
and India, alongside the coastal regions of both the nations and Afghanistan are very much
abundant in Sun light and Wind which could be harvested by constructing solar parks and wind
turbines.
Personally, I feel that time constraint restricted us from incorporating more countries and longer
time duration into the panel research which could have omitted biasness and resulted in a much
42
more accurate and solid results. By incorporating different countries from different continents
and pre-post war times, we could have more accurately determined the result of energy
consumption and its impact on economic growth/GDP as the economic dynamics change. We
could also have utilized actual values for some of the proxies that were used in the regression
and fill the missing figures with factual data and not just estimations.

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1

Impact of renewable and non-renewable resource consumption on the GDP

Renewable energy is linked to sustainable development which generally is defined as current

Gas: Electricity production from natural gas sources

Coal: Electricity production from Coal sources

Neuclar: Alternative and Nuclear energy consumption

Hydro: Electricity production from hydroelectric sources

CombinedNonrenewable: Electricity production from Oil, Gas and Coal sources

CombinedRenewable: Renewable electricity output

Trade: Trade as percentage of total GDP

Urbanization: Urban Population

Pollution: Air pollution level

Healthexp: Health Expenditure as percentage of total GDP

o H0: Null Hypothesis

o H1: Alternate Hypothesis

 Renewable energy has greater impact on GDP relative to non-renewable energy

Healthexp Current health expenditure (% of GDP) World Development Indicators (WDI)

(1) gdpcur 1.000

(2) coal 0.252 1.000

(3) hydro -0.188 -0.510 1.000

(4) gas -0.057 -0.236 -0.418 1.000

(5) oil -0.086 -0.237 -0.005 0.256 1.000

(6) 0.149 0.604 -0.738 0.608 0.204 1.000

(7) euneuclar -0.064 -0.479 0.425 -0.539 -0.286 -0.862 1.000

(8) 0.608 0.439 -0.094 -0.137 -0.030 0.255 -0.258 1.000

Table 2.1: Matrix of correlations (Developing, Countries)

(1) gdpcur 1.000

(2) coal 0.130 1.000

(3) hydro -0.216 -0.581 1.000

(4) gas 0.210 -0.000 -0.439 1.000

(5) oil 0.089 -0.025 -0.170 0.411 1.000

(6) 0.227 0.811 -0.723 0.571 0.327 1.000

(7) euneuclar -0.131 -0.685 0.492 -0.574 -0.308 -0.897 1.000

(8) 0.942 0.140 -0.204 0.222 0.211 0.257 -0.166 1.000

Table 2.2: Matrix of correlations (Developed Countries)

(1) gdpcur 1.000

(2) coal 0.566 1.000

(3) hydro -0.083 -0.366 1.000

(4) gas -0.379 -0.440 -0.619 1.000

(5) oil -0.271 -0.405 0.073 0.004 1.000

(6) 0.062 0.374 -0.982 0.630 -0.077 1.000

(7) euneuclar -0.050 -0.375 0.944 -0.584 0.029 -0.967 1.000

(8) 0.837 0.856 -0.138 -0.553 -0.323 0.142 -0.175 1.000

Descriptive Summary Statistics

Variable Mean Std.Dev. Min Max Observation

coal overall 26.299 25.777 0 96.331 N = 580

between 1.747 23.906 28.968 n = 20

within 25.720 -2.669 93.662 T = 29

hydro overall 23.134 27.020 0.037 99.514 N = 580

between 1.117 21.990 25.698 n = 20

within 26.998 -2.481 99.545 T = 29

gas overall 23.938 23.306 0 92.697 N = 580

between 1.522 20.797 26.841 n = 20

within 23.258 -2.176 91.924 T = 29

oil overall 4.199 6.462 0.006 45.508 N = 580

between 0.862 3.110 6.019 n = 20

within 6.407 -1.813 43.688 T = 29

combin~ w 54.436 31.045 0.128 98.878 N = 580

between 2.319 50.770 57.201 n = 20

within 30.962 -2.336 102.439 T = 29

euneuc~ r overall 13.334 12.931 0.106 49.590 N = 580

between 0.336 12.732 14.047 n = 20

within 12.927 -0.559 48.878 T = 29