The Relationship between Renewable Energy Consumption and Economic Growth in Iran

Subject Areas : Environmental Economics

MohammadSharif Karimi ¹ , Kiomars Sohaili ² , Shima Barzegari ³

1 - Assistant Professor, Department of Economics, Faculty of Social Sciences, Razi University, Kermanshah *(Corresponding Author)
2 - Associate Professor, Department of Economics, Faculty of Social Sciences, Razi University, Kermanshah
3 - M.Sc., Department of Energy Economics, Faculty of Social Sciences, Razi University, Kermanshah

Received: 2017-08-14 Accepted : 2017-12-13 Published : 2020-08-22

Keywords: Economic growth, Iran, VECM, ARDL bounds, Renewable Energy Consumption,

Abstract :

Background and Objective: Iran is one of the examples of growth patterns relying on natural resources, especially fossil fuels. Considering the end of the oil and gas resources of the country, from now on, there should be alternative sources of thought. One way of doing this is to using renewable energies instead of fossil fuels. From the point of view of energy economy, it is logical to create diversification in energy sources and utilize a basket of different fuels. Also, production-related pollution is expected to decrease as well by increasing the use of renewable energy. The purpose of this study was to investigate the relationship between renewable energy consumption and economic growth in Iran using ARDL bounds and VECM. Method: In this study, using the Eviews 9 software and the ARDL Bounds econometric method and the VECM model, a case study of Iran in the years 1981 to 2014 has been conducted. Findings: The results show that there is no causal relationship between renewable energy consumption and economic growth in the long run, and there is only one-way relationship between labor force and economic growth. But in the short run, there is a one-way relationship between economic growth and renewable energy use, as well as a one-way relationship between labor force and economic growth, renewable energy consumption and capital. Investigating the short-run dynamics of the pattern using instantaneous response functions showed that the shock eventually vanishes and often affects the response variable positively. Therefore, in the long run, shocks from independent variables, such as renewable energy consumption per capita, will be balanced against economic growth. Discussion and Conclusion: Considering the positive and statistically significant effects of renewable energy, capital and labor force variables on economic growth in Iran, it is suggested that by saving energy consumption, improving production technologies, reducing costs, the use of new energies, the promotion of appropriate and efficient policies and the creation of supportive laws will increase the use of renewable energy, which has a major role in the economy and the environment.

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