Latin American countries have abundant renewable energy resources, such as solar, wind, hydro, and geothermal, presenting a promising opportunity for sustainable economic growth. However, the region's potential economic impact of transitioning towards increased renewable energy consumption remains underexplored. This pioneering research aims to bridge this gap by conducting a comprehensive empirical analysis to investigate the causal relationship between renewable energy consumption and economic growth across Latin American economies.
The study employs a quantitative approach, utilizing panel data analysis for a sample of Latin American countries spanning a comprehensive period. The econometric model regresses economic growth, proxied by annual GDP growth rates, on renewable energy consumption while controlling for other pertinent factors influencing growth trajectories, such as foreign direct investment, trade openness, human capital development, and financial development indicators.
The research employs panel data techniques to address potential endogeneity concerns, specifically the system generalized method of moments (GMM) estimator. This dynamic panel approach utilizes internal instruments based on lagged levels and differences of the explanatory variables, providing consistent and efficient estimates while accounting for potential endogeneity. Robustness checks are conducted using alternative measures of renewable energy consumption, exploring different subsamples and periods, and investigating possible nonlinearities and threshold effects.
Based on the robust econometric methodology and the intrinsic potential of renewable energy resources in Latin America, the research is expected to uncover a positive and statistically significant impact of renewable energy consumption on economic growth in the region. The findings are anticipated to reveal that increasing the share of renewable energy can stimulate economic expansion by reducing reliance on imported fossil fuels, enhancing energy security, fostering domestic renewable energy industries, and attracting investment in clean energy technologies. Additionally, renewable energy adoption may contribute to environmental sustainability, reducing greenhouse gas emissions and mitigating the economic impacts of climate change, thereby supporting long-term economic resilience.
This research will contribute to understanding the economic implications of renewable energy deployment in Latin America. The study will inform policymakers and stakeholders about the viability and benefits of accelerating the transition toward sustainable energy sources by providing robust empirical evidence. The findings will support the development of comprehensive policy frameworks and strategic investment plans to harness the region's abundant renewable energy potential, fostering economic diversification, job creation, and sustainable development while contributing to the broader discourse on achieving the United Nations Sustainable Development Goals.
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