Evaluating the impact of energy policies on sustainable development in South Africa

The unachieved targets of the Millennium Development Goals (MDGs) at the end of 2015 by some developing countries including South Africa, lead to the evolution of the Sustainable Development Goals (SDGs). Ensuring access to sustainable, affordable, and modern energy is one of the 17 SDGs that the countries are expected to achieve before the end of 2030. Green growth is an important strategy for attaining this goal and a pathway to achieving the other goals. Therefore, an empirical study of the impact of energy policies on sustainable development is pertinent. Despite the importance of such research, there exists a gap in the literature relating to green growth and sustainable development from the SDGs point of view. This study fills the existing lacuna by developing an intertemporal holistic model which allows a study of the impact of energy policies on sustainable development in relation to the SDGs. Specifically, this thesis employs the Autoregressive Distributed Lag (ARDL) and Toda-Yamamoto approaches to analyse the long-run relationship and direction of causality respectively between green growth policies and sustainable development in South Africa from 1984 to 2016. This research provides insights into the importance of green growth for factors such as deforestation, fuel exports, energy imports and agricultural development, thus adding to the existing literature on the impact of renewable energy on a country’s social, environmental and economic conditions. Results from the analysis of the long-run relationship between green growth and macroeconomic variables, indicate a positive unidirectional relationship between changes in green growth policies and gross capital formation. This finding suggests that adopting green growth policies leads to increased investments. In contrast, green growth was found to have a negative effect on national income (gross domestic product). However, the Granger causality tests do not establish causality between these variables. Although green growth policies stimulate investments, high start-up costs associated with the implementation of these policies may mean that the resultant higher investments are yet to be translated to higher income levels in the South African economy. The findings indicate a boost in the South African balance of payment within the study period iv iv as evidenced by the positive long-run relationship between green growth policies and fuel exports. Additionally, the results indicate that green growth energy policies have assisted in improving the resilience to international oil price shocks as shown in the negative and significant long-run relationship between green growth and energy imports. With regard to environmental variables, results suggest a substitutability effect between green growth policies and the consumption of non-renewable energy. However, no evidence is found on the impact of green growth policies on the levels of deforestation and carbon dioxide(CO2) emissions, as well as natural resource depletion. In relation to the social variables, adoption of green growth policies was found to lead to improved educational quality, with causality running in both directions. This finding supports the feedback hypothesis. Similarly, green growth policies had a positive impact on agricultural development, again with causality established in both directions. The outcome of the long-run relationship between green energy consumption and unemployment shows that the green growth policies is yet to have a significant impact on unemployment reduction in South Africa. Green growth also has an insignificant and indirect relationship with GDP per capita; this result was affirmed by the absence of causality between GDP per capita and green energy consumption. This research not only makes contributions to the literature on the relevance of green growth policies for achieving economic, social and environmental sustainability, it also suggests possible policy implications which highlight the need for adoption and continued implementation of green growth policies in developing countries such as South Africa