Impact of Renewable and Non-Renewable Energy on Economic Growth of Myanmar

Situated in the western region of the Indochinese Peninsula, the Republic of the Union of Myanmar has several peculiar economic features. Green energy accounts for a substantial share of the nation’s energy balance. However, Myanmar is the second leading source of greenhouse emissions among ASEAN states.

The state withdrew fossil fuel subsidies in 2007 to thwart its widespread use, and three years later a military government was ousted by a democratic one which attracted investments to the country. Trade liberalization and better economic growth fast-tracked the production of renewable energy. Of late, the GDP growth in Myanmar has been amounting to 6.9% p.a.

Energy is a kind of natural capital and an essential component of economic growth (together with workforce and capital). CO₂ emissions are stated to be a negative side of such growth and an indication of low-efficient technologies. Ecologists propose substituting carbon-bearing energy with clean and renewable energy. Green energy is produced from renewable resources that are replenished by nature within human time span. Such sources include sunlight, rain, wind, and geothermal heat.

Renewable energy sources help decrease ecological costs and boost economic growth. Several studies have revealed that renewable energy develops new workplaces and creates new opportunities for entrepreneurs. It lessens the burden on the external accounts (financial flows between nations) and supports steady economic growth. According to the International Energy Agency, the share of green energy would grow by 2022, and by 40% by 2050. Many EU states, China, and the United States of America are keen to become world leaders in the field of renewable energy.

The reason behind this work was to appreciate the role of different energy sources in Myanmar's economic growth. So far, no similar studies of developing states have even been conducted. Before the study commenced, the researchers formed three hypotheses: advanced energy use boosts the level of economic growth; renewable energy results in economic growth; and the intensity of CO₂ emissions and low technological efficiency prevent economic development.

To verify them, the researchers examined the data between 1990 and 2016 and created a mathematical model based on this. Stable per capita GDP in USD (at the rate of 2010) was assumed as the dependent variable of the equation. Two autonomous variables were the basic use of renewable and non-renewable energy in gigawatt-hours. The intensity of CO₂ emissions per energy unit was said to be an indicator of technological efficiency. All variables were log-transformed to minimize the impact of anomalies on the calculations.

The model established all three hypotheses. The study shows that total energy use is positive but inconsequential in boosting economic growth in the short and long run. In the second model, the impact of decomposed energy use on economic growth demonstrates that renewable energy and non-renewable energy uses are indecisive in the long term, but renewable energy use is positive and important in the short term.

The third model shows the effect of renewable energy on growth while adding other control variables. Finally, the fourth model is re-estimated by looking at the impact of the interaction term between NRE and technological inefficiency (CO2I) on growth. The direct influence of NRE is negative and considerable. Similarly, the interaction of NRE and CO2I is also negative and considerable, which suggests that NRE, together with efficient technology use, in the production process is counterproductive to economic development.

According to the IEA, the carbon intensity of electrical energy production worldwide amounts to 0.5 g per 1 kW in 2018. The ideal share of renewable energy in the total energy consumption should amount to 51.43%, however, presently it is below 3%. The model revealed that renewable energy sources speed up economic growth while non-renewable ones have virtually no effect on it. In the long run, the increase of green energy use by 1 unit would result in economic growth by 0.3 units.

The study provides several policy implications. Given the minor role of non-renewable energy and the importance of renewable sources, political emphasis should be placed on the latter. Currently, Myanmar remains an oil importer which has a negative impact on its external accounts and economic growth. New technologies would increase its technological efficiency and speed up its development.

Sohag Kazi, PhD, Senior Researcher, Department of Econometrics and Statistics, Higher School of Economics and Management, UrFU

The study participants also represented the University of Southern Queensland, Bangladesh Ministry of Education, Stellenbosch University (South Africa), and Jahangirnagar University (Bangladesh).

Source: https://urfu.ru/en/