Does renewable energy efficiently spur economic growth? Evidence from Pakistan

There is a strong relationship between energy consumption (EC) and economic growth (EG) of a country. However, different sources of energy have different influence on EG of different countries. This paper attempts to identify the source of energy that efficiently spurs EG in Pakistan by exploring the short- and long-run relationship between EC and EG during 1972–2015. Breakpoint unit root test was used to investigate the stationarity properties of the variables along with structural break. Autoregressive distributive lag (ARDL) bound testing approach was used to determine the existence of long-run relationship among variables. The results of the ARDL model confirm the presence of cointegration among the variables. The findings confirm that renewable as well as non-renewable EC enhance EG in Pakistan. However, the magnitude of the coefficients and high significance level confirm that renewable energy (RE) spurs EG more efficiently than non-renewable energy. The study concludes that the government needs to increase investment in the development and exploration of RE resources to ensure sustainable EG in Pakistan.