This study analyses the long-run dynamic relationship between Brazil’s renewable and non-renewable energy consumption and its economic growth, treating non-hydro renewable energy consump-tion separately because of its very high 30-year compound annual growth rate of 10.01%. The data used were published by the Brazilian government during the period between 1980 and 2010.
The conventional neo-classical one-sector aggregate production technology treatment was employed, where capital, labour, and energy are treated as separate inputs. The results reveal common trends in the long-run between real output, capital formation, labour force, and each of the four type’s energy consumption including NHREC, TREC, NREC, and TEC. Brazil’s economic devel-opment is heavily dependent on investment as well as labour.
Furthermore, real output is quite sensitive to renewable energy consumption, while the impact of non-renewable or total primary
Fig. 4. CUSUM and CUSUMSQ plots for the estimated ECM of TREC.
energy consumption on real output is very small. This long-run relationship indicates that a 1% increase in total renewable energy consumption increases real GDP by 0.20%. The elasticity of Brazil’s real GDP to renewable energy consumption for Brazil is greater than that found by Apergis and Payne[22]for Eurasia, and lower than that found [23]for Central American countries as a whole.
Our findings highlight the importance of renewable energy sources within the Brazilian energy portfolio.
The results of the causal relationship between energy con-sumption and economic growth indicate a bidirectional causality between economic growth and TREC, unidirectional causality running from NHREC to economic growth, and unidirectional causality running from economic growth to NREC/TEC, but no causality running from NREC/TEC to economic growth in the long-run. There is bidirectional causality between economic growth and NHREC in the short-run. The results suggest that economic growth is crucial in providing the necessary resources for sustainable development and that Brazil is an energy-independent economy.
In the early 21st century, Brazil has converted from a large oil importer to energy self sufficiency. Thus, Brazil’s economy is no longer dependent on foreign oil supply. The expansion of renew-able energy projects can enhance Brazil’s economic growth, curb environmental degradation and carbon emissions, create an opportunity for a leadership role in the international system, and improve Brazil’s competitive standing with more developed coun-tries. The policies and decisions by Brazil’s government will be the principal drivers for further growth in renewable energy.
In order to enhance Brazil’s manufacturing sector and to create a scenario of sustainable energy supply in technical, environmen-tal, and economic aspects, Brazilian policy makers could introduce further incentive mechanisms that will foster continued develop-ment and market accessibility for renewable energy. One common political strategy is a feed-in law, such as that establishing feed-in tariffs. Another is enacting a renewable portfolio standard, also known as renewable obligations or quota policies. Other incentive policies to promote renewable energy include investment subsidies Fig. 5. CUSUM and CUSUMSQ plots for the estimated ECM of NREC.
or rebates, tax incentives or credits, sales tax exemptions, and green certificate trading.
Acknowledgement
The authors are grateful to the esteemed editor and reviewers for their valuable comments and help in improving the expositions of this paper. We are also grateful to the National Science Council of Taiwan for financial support through grant NSC 100-2221-E-009-085.
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