Impact of Dependence on Renewable Energy on GDP Per-Capita Growth: A Difference in Differences Approach
Increasing energy consumption behavior around the world is causing the high dependency on the non-renewable energy sources day by day. As a result, there is rapid depletion of the non-renewable energy resources along with detrimental effects on the environment. Based on these major concerns, 29 countries of European Union (EU) signed on an agreement known as “Renewable Energy Directive 2009” to increase their dependency on renewable energy sources by increasing the share of renewable energy to 20\%.Hence, this paper investigates the impact of this policy of increasing the dependence on renewable energy on GDP per-capita growth for these 29 EU countries. For the investigation, total 41 countries had been considered where 29 EU countries are in treatment group and 12 countries from North America, South America, Africa and Asia are considered in the control group. The time frame of the analysis is from 2003 to 2016 and the data are yearly data. Hence, by applying a standard difference-in-differences (DID) strategy, it can be causally attributed that, when the dependency on renewable energy had been increased in the EU countries due to the Renewable Energy Directive 2009, average per-capita GDP growth had been elevated in those countries even though there were price shocks in oil price and there was a global recession effect.
Keywords - Renewable energy, GDP per-capita growth, Difference-in-differences.