Adoption of Green Energy and Testing the Presence of Environmental Kuznets Curve in Kenya
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Date
2024-05
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Kenyatta University
Abstract
Energy is a determinant of economic growth in any economy, but due to different
sources of energy which are categorized into green and non-green energy, there is
a need for the economy to reduce the use of fossil fuels and consider using more
green energy resources. This is because the use of fossil fuels leads to
environmental pollution due to Carbon dioxide emissions into the atmosphere.
Reduction of fossil fuel consumption leads to reduction of Carbon dioxide
emission into the atmosphere, hence leading to global warming mitigation. The use
of Non-green energy sources causes environmental pollution which results in the
reduction of social welfare. Since little is known about the relationship between
economic growth and environmental pollution in Kenya, and also there was clear
policy on rates of substitution between green energy and non-green energy in
Kenya. This research project intended to estimate the Marginal rate of Technical
Substitution between green energy and non-green energy in Kenya and to ascertain
whether the Environmental Kuznets Curve on Carbon dioxide emission is present
in Kenya. The study used the Instrumental Variable (IV) approach to estimate
elasticities and finally determine the MRTS. The objectives of the study included;
first, to test the presence of the EKC hypothesis in Kenya. Secondly, it was to
determine the Marginal rate of technical substitution between green and non-green
energy in Kenya. The study used secondary time-series data from the year 1964 to
2021 from various sources and adopted the VECM model for analysis. Empirical
results revealed that the EKC hypothesis on Carbon dioxide emission exist in
Kenya in the long-run and not in the short-run. In the long-run, as per capita GDP
grows, the environmental degradation continues to decrease. The study also
concluded that Kenya requires more investment in green energy infrastructure in
order to replace non-green energy infrastructure without affecting GDP growth.
Investing in green energy to promote the use of clean energy, in the long run, leads
to sustainable economic development.
Description
A Research Project Submitted to School of Business, Economics and Tourism in Partial Fulfilment of the Requirements for the Award of Masters of Economics (Econometrics) of Kenyatta University. May, 2024
Supervisor
Dr. Diana Ngui Muchai
Lecturer
Department of Econometrics and Statistics
Kenyatta University