Does improvement in capital intensity facilitate the transition to renewable energies? Evidence from Tunisia

Abstract

The objective of this study is to investigate the potential role of capital deepening in promoting the transition to renewable energy in Tunisia. To this end, the long and short run effects of capital deepening on the renewable energy transition were explored using the vector error correction model (VECM) and the Johansen cointegration technique, along with a linear and nonlinear causality test in the context of Tunisia for the period 1990 to 2018. In particular, we found that capital deepening contributes positively to the transition to clean energy resources. In fact, the results of the linear and nonlinear causality tests confirm a unidirectional causal relationship between capital intensity and the transition to renewable energy. This explains that the increase in capital intensity ratio conducts technical change towards renewable energy, which constitutes a capital-intensive technology. Moreover, these results enable us to draw a conclusion about the energy policies in Tunisia and the developing countries in general. In fact, the renewable energy substitution depends on capital intensity, through the development of specific energy policies, such as renewable energy policies. Gradual substitution of fossil fuel subsidies with renewable energy subsidies is essential to faster the transition to renewable energy and promote capital-intensive production methods.

Climate sustainability through a dynamic duo: Green hydrogen and crypto driving energy transition and decarbonization

“…To mitigate fossil-based GHG emissions, countries must deploy renewable energy sources ( 10 – 12 ), a crucial component of the conventional mitigation framework that aids in accelerating the energy transition ( 7 ). Even with the implementation of targeted policies, incentives, and risk reduction measures ( 13 ), this transition to a cleaner energy structure faces obstacles such as high capital investment and the intermittent nature of renewable energy sources ( 14 – 16 ). As an extension of the conventional mitigation framework, several countries also plan to use an energy carrier to import clean energy ( 17 – 19 ).…”