The Impact of Renewable Energy Consumption on ...

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THE IMPACT OF RENEWABLE ENERGY CONSUMPTION ON CARBON DIOXIDE EMISSIONS-THE CASE OF SOUTH AMERICAN COUNTRIES Author¹; Author² Matheus Koengkan¹; José Alberto Fuinhas² [email protected] 1 University of Beira Interior, Covilhã, Portugal 2 University of Beira Interior, NECE-UBI, Covilhã, Portugal

INTRODUCTION

RESULTS AND DISCUSSION

Is the consumption of renewable energies associated with the decrease of carbon dioxide emissions? In order to answer this question, the impact of renewable energy consumption on the CO2 emissions will be analyzed in ten South American countries from 1980 to 2012.

The Dynamic Fixed Effects (DFE) estimator, DFE robust standard errors, and DFE Driscoll and Kraay (DFE D.-K) were applied. Table 1. shows the estimation results.

The study of this theme is fundamental to understand the real impact of renewable energy consumption on CO2 emissions, and also due to the fact that very few studies approach South American countries. Additionally, the choice of this region is justified due to the rapid consumption growth of renewable energies.

MATERIAL AND METHODS Data from ten South American countries was analyzed, namely Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Peru, Paraguay, Venezuela, and Uruguay in a period from 1980-2012.

Table.1. Estimation results Dependent variable (DLCO2) DFE Constant Trend

-4.3155 -0.0023

DLRE DLGDP DLP

-0.0420 0.2792 0.6371

LRE (-1) LGDP(-1) LP(-1)

-0.0263 0.5025 0.6196

DFE Robust *** *** *** * Short-run (Semi-elasticities) *** *** *** *** *** Long-run (Elasticities)

DFE D.-K *** *** ** *** ***

** ** ** *** *** *** Speed of Adjustment ECM -0.2427 *** *** *** Notes:***, **,* denote statistically significant at 1% ,5% and 10% level, respectively; The ECM denotes error correction mechanism; the long-run parameters are computed elasticities; the Stata commands xtreg, and xtscc were used.

The variables used in analysis were: (i) Carbon Dioxide Emissions (CO2), from the consumption of fossil fuels energy in million metric tons; (ii) Renewable Energy Consumption (RE) in billion Kilowatthours from wind, geothermal, solar, biomass, and waste; (iii) Gross Domestic Product (GDP) in constant local currency units (LCU); (iv) Petroleum consumption (P) in quadrillion Btu. Furthermore, the Unrestricted Error Correction Model (UECM) form of the Auto Regressive Distributed Lags (ARDL) method was also used. The general UECM form of the ARDL model used in this empirical analysis follows the specification of the Equation (1): k

k

k

j 1

j 1

j 1

DLCO2it  α0i  δ21iTRENDt    22ij DLRE it-j    23ij DLGDPit-j    24ij DLPit  j   21i LCO2it 1   22i LREit 1   23i LGDPit 1   24i LPit 1  i  it.

(1)

Where, the prefixes (L) and (D) donates the natural logarithms and first differences of variables, and (DLCO2 in short-run, and LCO2 in long-run) are the dependent variables, and (DLRE, DLGDP and DLP in short-run, and LRE, LGDP and LP in long-run ) are independent variables. Indeed, the is intercept, is the (TREND), are the parameters of variables, and is the error term of the model.

The results shows that the semi-elasticities of renewable energy consumption reduces CO2 emissions in -0.0420, and the elasticities does not decrease emissions. Additionally, in the short-and long-run ,GDP and Petroleum consumption increases CO2 emissions.

CONCLUSIONS AND POLICY IMPLICATIONS When, in the short-run, the consumption of renewable energies increases 1%, CO2 emissions get reduce 4.5%.The empirical evidence shows that renewable energy consumption plays an important role in reducing CO2 emissions. Moreover, to achieve steady and sustainable growth in the use of renewable energies, the governments should design and implement effective support policies to promote investment in renewable technologies.

ACKNOWLEDGEMENTS The financial support of the NECE - Research Unit in Business Science and Economics, sponsored by the FCT Portuguese Foundation for the Development of Science and Technology, Ministry of Education and Science, project UID/GES/04630/2013.