The Relationship Between Economic Growth and Fossil Fuel Energy Consumption Growth in Net Energy-Importing Emerging Economies

Abstract

This dissertation investigates the relationship between economic growth and fossil fuel energy consumption through three interrelated chapters—each of which addresses a facet of the relationship. The first chapter argues that mainstream explanations for Industrial Revolution generally assign a pride of place to institutional—secure property rights—and technological innovations—the steam engine. Using interdisciplinary sources, this chapter shows that mainstream explanations are based on narrow empirics. More importantly, this chapter shows that switching from water to fossil fuel-based energy sources during the Industrial Revolution was not based on economic considerations since water was neither scarce nor more expensive than coal. Placing the Glorious Revolution on the same historical continuum as the Industrial Revolution—through their common link with the Enclosure Movement—this chapter argues that the real reasons behind switching to fossil fuels were political-economic. The second chapter argues that the relationship between economic growth and fossil fuel energy consumption has not been thoroughly investigated in the case of emerging economies. Building on the understanding obtained via economic history accounts, this chapter argues that the relationship between economic growth and fossil fuel energy consumption is structurally different in emerging economies. This chapter traces the linkages between economic growth and fossil fuel energy consumption in emerging economies, highlighting the role played by various economic, structural and technological factors. This chapter also shows that emerging economies—net energy importers, to be specific—face unique macroeconomic challenges in the shape of balance-of-payments crises and financial instability that stem from sudden and severe increases in their energy import bills. The third chapter empirically examines the relationship between economic growth and fossil fuel energy consumption growth in a sample of 35 net energy-importing emerging economies. Results show that in the sample of 35 emerging economies, economic growth Granger causes fossil fuel energy consumption growth in the period 1981-2013. Country-level scatter plots also indicate that in the sample of 35 emerging economies, the relationship between real GDP per capita and fossil fuel energy consumption per capita is linear when using K-Nearest Neighbor algorithm—and not curvilinear as postulated by the environmental Kuznets Curve (EKC) hypothesis.