The causal linkages between renewable electricity generation and economic growth in South Africa

Knowledge of the direction of causality between electricity generation from renewables and economic growth is essential if energy policies which will support economic growth of the country are to be devised. This study explores the causal relationship between electricity generated from the renewables and economic growth in South Africa using carbon dioxide emissions, employment and capital as the additional variables. The study uses the Johansen co-integration model to detect the long run relationship between the variables and the Vector Error Correction Model (VECM) to determine the direction of causality. The findings from Johansen co-integration evidenced a long run relationship between electricity generated from renewables, economic growth, carbon dioxide emissions, employment and capital. The VECM revealed unidirectional causality running from electricity generated from renewables to economic growth. The findings indicate that electricity generation from renewables enhance economic growth. Therefore, the government should make appropriate efforts to select energy policies that do not negatively affect economic growth.