Renewable energy and economic growth in the MENA region: empirical evidence and policy implications

ABSTRACT We estimate the impact of an increase of installed capacity for electricity generation from renewable sources and from increasing renewable electricity generation on economic growth in the MENA region, using a neoclassical growth function that includes capital, labor and energy use as additional input factors. Our working hypothesis is that there could be a negative impact from renewable electricity on growth, given the high initial investments associated with alternative energy technologies. We could not prove this hypothesis and even found some evidence for a positive relation between renewable electricity and growth, mainly for renewable electricity generation; however, causality remains unclear. The results hold for several robustness checks. We conclude that investing in renewables does not hinder growth in MENA countries.