The impacts of energy prices and technological innovation on the fossil fuel-related electricity-growth nexus: An assessment of four net energy exporting countries

Abstract

This study uses annual data from 1974 to 2011 to examine the long-run and short-run relationships between fossil fuel powered electricity consumption, economic growth, energy prices and technological innovation for four net energy exporting countries. Canada, Ecuador, Norway and South Africa are chosen as the main research background in order to investigate how the development degree and economic dependence on energy exports affect the electricity-growth nexus. Based on the results drawing from the ARDL approach and the Granger causality test, economic growth positively influences the variation in fossil fuel powered electricity consumption in both the short-run and long-run for all four countries. The reverse causality from electricity consumption to economic growth is only evident in Ecuador and Norway. The degree of dependence on energy exports is a contributory factor of explaining the causality puzzle of the electricity-growth nexus. Given the fact that technological innovation does not benefit fossil fuel powered electricity generation, this paper suggests these net energy exporting countries to replace fossil fuel with more sustainable and effective sources in the electricity generation process.