An Essay on the Welfare and Growth Implication of the Energy Mix in the South African Economy

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University of the Witwatersrand, Johannesburg
This study investigated the welfare and growth implications of introducing renewable energy in South Africa’s energy mix. The investigation is divided into three chapters, providing a holistic analysis of climate change mitigation on developmental goals in South Africa. The first chapter determines the impact of the usage of non-renewable energy sources on selected sectors’ economic output in South Africa. The second chapter determines the pass-through effect and the response of consumer prices to renewable energy share increases in South Africa while using the exchange rate as a threshold. The third chapter determines through a natural experiment the impact of renewable energy policies such as the White Paper on the Energy Policy of the Republic of South Africa (1998), the White Paper on Renewable Energy Policy (2003) and the Integrated Resource Plan (2010) on South Africa’s economic growth by comparing the gross domestic product (GDP) growth path before and after the introduction of these policies. Results from the second chapter showed that coal was the least contributing factor to production for most sectors, showing that excessive coal usage may hinder economic output within the country. Petroleum has a positive and significant effect on the transport and agriculture sectors but has less of an effect on the other sectors. Electricity is a major contributing factor to production in some sectors, except for the industry sector, which may be adversely affected by the increasing electricity costs and constant load shedding in the country. Results from the third chapter showed that at an exchange rate threshold value of 7.7 R/$, the share of renewable energy pass-through to consumer prices is statistically significant below and above the threshold exchange rate value. When the exchange rate is above the threshold value, the pass- through effect is negative, indicating that an increase in the share of clean energy will decrease consumer prices. These results are largely attributed to the cost of renewable energy, which has been declining significantly in periods where the exchange rate was above the threshold value and, as a result, it had a negative pass-through effect on consumer prices. Results from the fourth chapter showed that each of the three green energy policies has a positive impact on the GDP, which shows that implementing renewable energy policies in South Africa has not only resulted in generating clean, renewable energy but also fosters economic growth within the country. Using a natural experiment, the study constructed a synthetic GDP growth path that vi would have been in place had there been no renewable energy intervention and compared it with the current GDP growth path post the intervention of renewable energy policy to identify the causal positive impact of green energy on economic growth. This thesis’ results encourage policymakers to further implement and improve renewable energy policies as the share of clean energy within South Africa’s energy mix not only mitigates climate change by decreasing greenhouse gas emissions but also positively affects economic growth by creating a clean ecosystem, job creation, increasing innovation and capital formation and overall improving total factor productivity in South Africa and the standard of living of ordinary South Africans
A research report submitted in fulfillment of the requirements for the degree Doctor of Philosophy (PhD) in Economics At School of Economics and Finance University of The Witwatersrand, 2023
Economic Output, Renewable Energy, Non-renewable Energy, Labour, Labour Force, Petroleum Produce, Electricity, Natural Experiment, UCTD
Sesele, Masedi. (2023). An Essay on the Welfare and Growth Implication of the Energy Mix in the South African Economy [PhD thesis, University of the Witwatersrand, Johannesburg]. WireDSpace.