Threshold Effects on South Africa’s Renewable Energy–Economic Growth–Carbon Dioxide Emissions Nexus: A Nonlinear Analysis Using Threshold-Switching Dynamic Models

Luyanda Majenge (), Sakhile Mpungose and Simiso Msomi
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Luyanda Majenge: School of Accounting, Economics & Finance, College of Law & Management Studies, University of KwaZulu-Natal, Durban 3629, South Africa
Sakhile Mpungose: School of Accounting, Economics & Finance, College of Law & Management Studies, University of KwaZulu-Natal, Durban 3629, South Africa
Simiso Msomi: School of Accounting, Economics & Finance, College of Law & Management Studies, University of KwaZulu-Natal, Durban 3629, South Africa

Energies, 2025, vol. 18, issue 17, 1-41

Abstract: The transition of South Africa from coal-dependent energy systems to renewable energy alternatives presents economic and environmental trade-off complexities that require empirical investigation. This study employed threshold-switching dynamic models, NARDL analysis, and threshold Granger causality tests to investigate nonlinear relationships between renewable energy generation, economic growth, and carbon dioxide emissions in South Africa from 1980 to 2023. The threshold-switching dynamic models revealed critical structural breakpoints: a 56.4% renewable energy threshold for carbon dioxide emissions reduction, a 397.9% trade openness threshold for economic growth optimisation, and a 385.32% trade openness threshold for coal consumption transitions. The NARDL bounds test confirmed asymmetric effects in the carbon dioxide emissions and renewable energy relationship. The threshold Granger causality test established significant unidirectional causality from renewable energy to carbon dioxide emissions, economic growth to carbon dioxide emissions, and bidirectional causality between coal consumption and trade openness. However, renewable energy demonstrated no significant causal relationship with economic growth, contradicting traditional growth-led energy hypotheses. This study concluded that South Africa’s energy transition demonstrates distinct regime-dependent characteristics, with renewable energy deployment requiring critical mass thresholds to generate meaningful environmental benefits. The study recommended that optimal trade integration and renewable energy thresholds could fundamentally transform the economy’s carbon intensity while maintaining sustainable growth patterns.

Keywords: renewable energy; economic growth; carbon dioxide emissions; NARDL; threshold-switching dynamic models; threshold Granger causality test; South Africa (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2025
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