Green or gas in OPEC member countries: a linear and asymmetric investigation of energy–growth nexus

• DOI: http://doi.org/10.1111/opec.12190
• Published date: 01 December 2020
• Date: 01 December 2020

Green or gas in OPEC member countries: a

linear and asymmetric investigation of

energy–growth nexus

Ebere Ume Kalu* , Florence U. Nwafor*, Augustine C. Arize**,

Leo-Paul Dana***, John Malindretos**** and Josaphat U. Onwumere*

*University of Nigeria, Nsukka, Nigeria. Email: ebere.kalu@unn.edu.ng Email: f‌loxynwafor@yahoo.com

Email: josaphat.onwumere@unn.edu.ng

**Texas A&M University, Commerce, TX, USA.

***Dalhousie University, Halifax, NS, Canada.

****William Paterson University, Wayne, NJ, USA. Email: jmalindretos@yahoo.com

Abstract

This study employed a combination of linear and nonlinear models to investigate the

energy–growth nexus of OPEC member countries from 1960 to 2018 in a country-specif‌ic form.

It questioned the environmental friendliness of the energy initiatives of OPEC member countries as

major producers and exporters of crude oil. Primary evidence of the study shows energy

dependence among OPEC member countries supporting the growth hypothesis. We also found

complementarity in fossil fuel and renewables as inducers of growth in 70% of the studied

countries and found greater growth inf‌luence of fossil fuel in the case of 16% of the studied

countries. In a country like Congo, we found greater inf‌luence from renewable energy, while

Gabon’s status was indeterminate. The dynamic prof‌ile of the energy–growth nexus evidenced by

the error correction representations in their linear and asymmetric forms shows that growth adjusts

nonlinearly to energy use in about 39% of the investigated OPEC member countries, and linearly

in 61% of the countries. It can be said from our f‌indings that global initiatives on green energy are

gaining grounds in a preponderance of OPEC member countries.

1. Introduction

Renewable energy sources have severally been described as emerging, environmentally

friendly, technologically and economically attractive choice available to meet the energy

needs of countries, corporations and citizens. This is even made more needful as tackling

climate change and its attendant challenges become more and more critical (IRENA,

2019). The ability of this energy source to contain harmful emissions while providing

dependable resources for electrical generation has been the main advantage of renewable

energy. Its proven ability to curb global warming, while promoting energy generation

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has put renewables above other energy sources (Moosavian et al., 2013). Following

Tzankova (2020), renewable energy is important for alleviating health, environmental

and distributive problems that are common with conventional energy use and extraction.

According to Naimoli and Ladislaw (2019), a key question remains how companies

in the oil and gas industry will survive in a low carbon world. However, the transition of

leading global oil and gas corporations to general energy readily answers this question.

The energy industry sees a revolution coming. Proactively, major global players like

Chevron and ExxonMobil launched into the Oil and Gas Climate Initiative (OGCI) with

$1 billion investment in innovative energy technologies in response to climate change

(OGCI report from 2018). There is also the rebranding by BP to Beyond Petroleum with

Shell doubling its investment in renewables, electric automobile technology and solar

power (Chevron’s Annual Report 2018; Mike, 2019).

The discovery of new energy resource has been touted as having the capacity to

jeopardise the economic position of key global energy player, particularly OPEC. The

International Energy Agency (IEA, 2014) report puts it that OPEC’s share of the global

‘productive’oil capacity will continue to fall, at 57% in 2019 representing a decline from

58% in 2013. Conversely, the share from non-OPEC member countries will keep rising,

standing at 43% in 2019 representing an increase from 42 per cent in 2013. These are

relative indicators of changes for OPEC that has controlled the market over the past f‌ive

decades.

The world is on the verge of an energy revolution caused by new energy

technologies and supplies. The dimension of this revolution is different from those of the

past half a century, which were ignited by severe supply shocks (Jeffrey, 2014). As Nam

et al (2020) observe as follows: renewable, safe and sustainable energy systems and

policies are being globally promoted as a departure from fossil fuel sources to such

sources like wind power, photovoltaic energy and fuel cells. Evidently, boom in fossil-

fuel production, renewable energy rollout and the new energy resources of the 21st

century enhanced by business models designed to cut energy waste are typically

destabilising the old economic order, Jeffrey (2014).

A breakdown by IRENA (2019) holds that wind and solar are now providing 6% of

electricity generation worldwide representing a 0.2% rise from the year 2000 and that

renewables currently accounts for around a quarter of global electricity generation

(IRENA, 2019). It is forecasted that solar and wind remain the leading sources of

renewables attracting new investment in the region of 80% in the sector as its costs

progressively fall (Bloomberg New Energy Finance, 2019). Naimoli and Ladislaw

(2019) capture that the Global Weighted Average Levelized Cost of Electricity (LCOE)

for solar photovoltaics dropped from 37 cents per KWh in 2010 to 8.5 cent per KWh in

2018 representing a 77% fall. Onshore wind sources also fell to 34% from 8.5% per

KWh with offshore wind falling to 21% from 16% per KWh. The U.S. Energy

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Information Administration (EIA) projects that renewables energy generation will likely

account for 49% of global electricity generation by the year 2050, International Energy

Outlook (2019).

Many governments are leaning towards domestic renewable energy choices so as to

replace unsustainable fossil fuel-based industries, with the sector continuing to grow

year in year out. In fact, the renewable energy sector currently employs at least 11

million people globally; an increase from 10.2 million in 2017 and countries is

intensifying the business adopting renewable energy technologies for consumption and

commercial reasons (IRENA, 2019). The trends in the renewable market have continued

to change in terms of investment and new capital even in developing countries. This has

obviously changed the dynamics of the energy sector, making renewable energy policies

‘the rule rather than exception around the globe’, Gurtler et al. (2019). Based on this,

falling prices increased decoupling of economic growth and greenhouse gas (GHG)

emission are overly being recorded (World Energy Council, 2016).

Aside this rising attractiveness of renewables, concerns have been raised by not just

oil-importing countries but also the exporting countries, especially after the global

shocks of 2008 and 2014 (World Energy Council, 2016). It is also envisaged that the

rising attention to global warming degrades fossil fuels creating another challenge for

OPEC since renewable energy, which can serves as an alternative to fossil fuel, can be

stored and sold to non-fossil fuel-demanding countries (Deniz, 2019). This is the

economic reality for most OPEC countries given that they not only have substantial oil

and gas reserves, their economies also rely on oil and gas export as major source of

revenue. This is reinforced by Alizadeh et al (2019) who opine that energy and climate

policy now go together and are of particular importance to countries that produce fossil

fuel because their economies are intricately connected to fossil fuels and allied issues.

Against this backdrop emerges the need to investigate the interaction of these

variants of energy sources as triggers for the growth of OPEC member countries. This is

looked at from the linear and asymmetric standpoint with the view to establishing what

drives growth in OPEC member countries –traditional and less environmental friendly

energy sources or renewable energy (more environment friendly energy sources).

This study has some value additions. Firstly, it is expected to trigger the move to

more energy friendly consciousness on the part of OPEC member countries who are at

the front line of fossil fuel and natural gas production, exportation and consumption. It is

designed to investigate the response rate of these countries to Greenhouse and Safe

Energy campaign regardless the fact that they sit on high natural oil and gas deposit.

Secondly, since OPEC represents a mixed bag of emerging and developing economies,

this study will expose the energy–growth nexus of these countries, respectively. The

nuances of the OPEC member countries will be contextualised while bringing to fore the

disparity or congruence of the energy–growth interface in these countries. Third, this

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