The Causal Relationship of Renewable Energy and Non-renewable Energy Consumption to the Economic Growth of the Philippines

Abstract

The Philippines has one of the highest electricity prices in Asia. Contributing factors to these are the short supply of domestic coal and oil resources, the high cost of imported coal, and the lack of pursuit of renewable energy. This paper looks into the causal relationship between energy consumption and economic growth in the Philippines. It identified if a Granger causality exists between variables GDP per capita, renewable energy consumption per capita and nonrenewable energy consumption per capita. An objective was to identify if shifting to renewable energy is a means to further spur Philippine economic growth. GDP per capita data was taken from the World Bank, while energy consumption per capita of renewable and nonrenewable energy was calculated from Our World in Data ranging from years 1965 to 2019. Granger causality tests were used to determine if said variables Granger caused one another. Results show support to the null hypothesis that renewable energy consumption and nonrenewable energy consumption per capita do not Granger cause GDP per capita. A significant positive relationship was found between nonrenewable energy consumption and GDP. Taken together, these empirical findings provide valuable information for policymakers and future researchers. Results suggest that energy conservation policies may still be implemented in the Philippines without negatively affecting economic growth. Policy recommendations include the usage of renewable energy sources to mitigate environmental degradation and reduce carbon emissions. As renewable energy becomes more appealing as a source of efficient and sustainable electricity, significant support and attention must continually be given to the country's renewable energy industry.