The investment dynamics in renewable energy transition in Africa: the asymmetric role of oil prices, economic growth and ICT

Abstract

Purpose This study aims to investigate the effect of oil prices, economic growth and information communication technology (ICT) on investment into renewable energy transition (RET). Design/methodology/approach Based on six selected African countries (i.e. Algeria, Egypt, Angola, Ethiopia, South Africa and Nigeria), the study uses a nonlinear autoregressive distributed lag model over the period from 1995 to 2020. Findings The results show that increasing oil prices, by substitution effect, leads to increasing RET investment, while declining oil prices lead to decreasing RET investment in the short and long run. Furthermore, the results reveal that increasing real gross domestic product leads to increased RET investment, while declining real gross domestic product (GDP) leads to decreasing RET investment both in the short and long run. Simultaneously, the study shows that increasing ICT has a significant and positive impact on RET investment, while declining ICT has a significant negative impact on RET investment in the short and long run. Originality/value The findings of this study have advanced the understanding of which factors significantly influence RET investment and the need to concentrate efforts on strategically addressing those factors. The findings indicate that these countries are at the progressive stage in terms of renewable energy; though increasing oil prices contribute to rising RET investment, the countries can be more proactive by improving the full potential of ICT as well as facilitating the growth of their economies.

Nudging Sustainable Development: Reviewing Energy Transition and Economic Development

“…Under the requirements of the Kyoto Protocol and the Paris Agreement, an increasing number of countries have embarked on their own path towards energy transition. Regarding the influencing factors of energy transition, scholars have explored various aspects such as resource endowments, society, technology, taxation, income levels, international trade, domestic trade, and FDI [22,114]. They have found that energy transition is a systemic theme, and numerous factors can drive and enhance the pace of local energy transition.…”

“…Geopolitical risks Geopolitical risks improve energy transition movement [78] Firstly, technology is the primary productive force, and thus, breakthroughs, utilization, and spillover of technology can effectively enhance energy efficiency and promote energy transition. Technological innovations increase the capacity to produce green energy to meet potential demand and expand the applicability of green energy [22,38,62,93,107,114,121]. It is found in [68] that environmental concerns and the development of renewable energy technologies have significantly reduced emissions and promoted energy transition.…”

“…The trade of Information and Communications Technology (ICT) goods and services directly contributes to increased renewable energy consumption, accelerates energy transition, promotes the utilization of renewable energy, reduces energy intensity, and lowers carbon dioxide emissions [2]. The growth of ICT has a positive impact on investments in renewable energy technologies (RET) [121,123], whereas the decline in ICT has a negative effect on RET investments in both the short and long term [22].…”

“…The term "economic growth" refers to the continuous increase in the level of economic output in a country or region over a period of time [10,19], while the concept of "economic development" is more comprehensive [20]. Considering the literature related to energy transition, the distinction between the two has not been strictly made, with GDP or per capita GDP used as indicators of economic development [21][22][23]. Therefore, in this study, both terms refer to the level of economic output of a region or country.…”

“…It was found in [5] that in the process of global economic development, emerging economies such as China and India have been driving the world's energy demand upwards. Scholars have begun to incorporate an increasing number of factors into their considerations, utilizing past data to explore the relationship between energy transition and economic growth [27,28], the application of new energy sources, and other elements influencing regional economic development [22,29,30]. Furthermore, factors such as foreign direct investment (FDI), domestic trade, domestic financial development, and the growth of the digital economy have varying degrees of influence on a country's energy transition and emissions [8,17,[31][32][33].…”