Investing in the relationship between industrial output, renewable energy, and sustainable economic development in Ethiopia: Does clean energy matter?

Feng Wang and Mulatu Tilahun Debel

Energy Policy, 2025, vol. 207, issue C

Abstract: Sustainable modern energy is crucial for unlocking development potential in countries like Ethiopia, supporting resilient industry and infrastructure. This study examines the relationship between renewable energy, industrial output, and economic growth, emphasizing how clean energy investments enhance productivity and environmental benefits. Using Wavelet coherence and the ARDL Error Correction Model (ECM) methodology, we analyze time series data from 2000 to 2021 sourced from World Development Indicators. Our findings reveal a significant long-run relationship among industry value added, renewable energy consumption (REC), and economic growth, with a strong positive correlation between industrial value added and GDP. Higher REC is associated with increased industrial value added and GDP, underscoring the importance of renewable energy investment for sustainable development. While an increase in renewable energy share boosts industrial output, its positive relationship with CO2 emissions highlights the urgent need for cleaner energy transitions. A high material footprint indicates excessive resource consumption, leading to environmental degradation and economic costs. Granger causality relationships show dynamic interactions among these variables, reinforcing the role of technological advancements in promoting growth. We advocate for policies that align renewable energy initiatives with workforce development to foster growth and employment opportunities, emphasizing energy efficiency and sustainable practices.

Keywords: ARDL; Renewable energy; Industrial output; Economic growth; Sustainable economic development; Ethiopia (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:enepol:v:207:y:2025:i:c:s0301421525003519

DOI: 10.1016/j.enpol.2025.114844

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