Renewable Energy Transition and GDP Growth: Does Green Energy Pay Off?

Abstract Book of the 11th International Conference on Applied Research in Management, Business and Economics

Year: 2026

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Renewable Energy Transition and GDP Growth: Does Green Energy Pay Off?

Gerson Fumbuka, Dr. Latha Manickam, Mr. Manickam Ramasamy, Dr. C. Lucia Vanitha, Dr. B. Ramani Mabel

ABSTRACT:

While carbon pricing and green stimulus measures have served as immediate policy responses to the climate emergency, longer-term commitments to renewable energy are on the rise across advanced and developing economies. Yet the evidence on each country’s ability to reap macroeconomic returns from the green transition is lacking. Assessing whether low-carbon growth trajectories are either growth-enhancing or growth-compromising is of paramount policy importance.
This paper examines the macroeconomic returns to renewable energy transition across a balanced panel of 60 countries over 2000-2022 (N=1,380). Employing a sequential identification strategy, Two-Way Fixed Effects (TWFE) with Driscoll-Kraay standard errors, System Generalised Method of Moments (System-GMM), Panel Vector Autogression (PVAR), and quantile regression, we conclude that a one percentage-point increase in renewable energy share is robustly associated with 0.183-0.217 percentage-point higher real GDP per capita growth. Wind energy delivers the largest source-specific dividend (β = 0.241, p < 0.01), followed by solar (0.198) and bioenergy (0.134); hydropower exhibits concave diminishing returns above 60% penetration. Quantile regression reveals the growth premium is concentrated in the upper growth distribution (Q90: β = 0.318), signalling a complementary mechanism favoring well-endowed economies.
Investing in the green energy transition yields a statistically significant and economically meaningful GDP growth per capita premium in all countries, across all income levels and heterogeneity
Results are robust to the Augmented Mean Group (AMG) estimator, crisis-period exclusion, and alternative variable measurement. Policy implications emphasize bundled renewable investment with grid infrastructure, institutional reform, and concessional finance for developing economies.

Keywords: Renewable Energy, GDP Growth, Energy Transition, TWFE, System-GMM