A MULTIVARIATE ANALYSIS BETWEEN RENEWABLE ENERGY, CARBON EMISSION AND ECONOMIC GROWTH: NEW EVIDENCES FROM SELECTED MIDDLE EAST AND NORTH AFRICA COUNTRIES

The paper investigated cross-cutting issues relating to renewable energy, carbon-emission and economic growth for a group of 8 MENA countries covering the period 1990-2018. Adopting a modified linear Cobb-Douglas production function, the study adopted the Fully-Modified and the Dynamic OLS estimation technique in examining the aforementioned relationship. Findings from the panel FMOLS and DOLS for the region confirm that a significant relationship exists between CO2 emission and economic growth and that renewable energy consumption triggers a significant effect on economic growth as well. Conversely, the panel of the FMOLS result reveals that while economic growth reacts positively from the effect of CO2 emission, CO2 emission reacts negatively from the effect of renewable energy consumption, as against the positive outcome between renewable energy consumption and CO2 emission as reported by the DOLS. This goes to point out that most economies within this region are yet to uncover best and appropriate policies which can control the regulation of renewable energy prices, that can help take into consideration the stability in economic growth structure and at the same time, mitigate the emission of Greenhouse Gases (GHG).


INTRODUCTİON
Climate change has been attributed to the massive use of polluting energy sources (fossil fuels) in recent times. This change caused unwittingly several effects on human and natural condition. If Greenhouse gases (GHG) emissions continue its upward trajectory, it will further global warming and long-lasting changes in all components of climate arrangement. The carbon emissions growth rate has generated several issues relating to the health of the population and on the quality of the environment (Jebli, 2016). The impact of emissions on environmental quality has remained a topical issue developed by series academic and scientific researchers (UNFCCC, 2014). The World Bank has played essential roles in supporting efforts to declining pollution rate and endorsed low level of emissions growth. The efforts of the World Bank are mainly focused on enhancing countries to use clean energy generation by giving financial incentives (World Bank, 2013). It is relevant to note that the Middle East and North Africa (MENA) region has around 57% of the world's proven oil reserves and 41% of proven natural gas reserves (Menichetti, et al., 2018). About 85% of all GHG emissions in this region are mainly derived from energy produced and consumed. CO 2 emissions (measured in Millions kilotons) has increased largely in MENA countries since 1980 (Figure 1). The associated environmental problems are aggravated through heavy subsidies on petroleum products which promote excessive and inefficient use of fossilfuels (Farzanegan and Markwardt, 2012).
The drive for sustainable development is therefore urgently needed for all MENA countries. On one hand, energy used in economic activities may enable such social and economic development, but on the other hand, can have negative impact on the environment resulting to climate changes at the global scale (Alshehry and Belloumi, 2017). Conventional energy consumption may contribute to the relation between CO 2 emission and economic growth via two channels. Conventional energy use may lead to an increase in economic activities, and at the same time, affect CO 2 emission positively. The replacement of a part of conventional energy by renewable energy can trigger the negative effects caused by the overuse of fossil fuels in MENA countries. Based on the above premise, this study attempts to fill the gap by examining the cross-cutting relationship between economic growth, renewable energy consumption and CO 2 emissions using a modified Cobb-Douglas production function which is expanded to include the energy component as an additional production factor as developed by Ismail and Mawar, (2012).
The MENA region is chosen for two basic premise that, environmental quality has worsened in the recent decades in this region due to the extensive use of fossil fuels. Most of the MENA countries use hugely fossil fuel energy without taking into account the necessary preconceptions to avoid the growth of CO 2 emissions. Quite a number of indicators are directly correlated with CO 2 emissions growth, and it is imperative to look for the input of these variables in the progress of emissions. Renewable energy resources (mainly solar and wind energies) are important in MENA countries that can be harnessed to overcome environmental pollution in the region, and even in the world. Compared to the previous studies in the region, this study considers the case where renewable energy is used for production. The empirical analysis employs the FMOLS and DOLS estimation technique developed by Kao and Chang (2001) in a bid to generate unbiased and consistent long run estimates. The other sections of this paper are organized as follows; section 2 discusses relevant literature, while section 3 presents highlights the econometric methodology. In section 4, we present the results and discussion, while section 5 concludes the study and provides relevant policy recommendations.

Renewable Energy in the MENA Region
Most of the region's greenhouse gas (GHG) emissions are largely linked to the region's role as an energy producer. IEA (2018) estimates total GHG-emissions from fuel combustion in MENA was equal to 1.860 million metric tons of CO 2 equivalent in 2008, accounting for 6.3% of the global emissions. By 2010, emissions from the region's power sector were estimated to have risen to 2.101 million metric tons of CO 2 equivalent (World Bank, 2012). As reported from Table 1, renewable electricity net consumption has not been stable within this period , while the per capita CO 2 emissions varies around 50 million metric tons per capita. For some countries, the consumption of electricity has the tendency to rise across time such as Egypt and Iran. Egypt is said to be largest consumer of electricity adopting renewable energy with Iran as the second. Their respective annual averages of electricity net consumption are 14.19% and 11.38% respectively. Saudi Arabia, Qatar and Oman are the three smallest consumers of electricity with 0.062%, 0.055% and 0.003% respectively. Indeed, Qatar and UAE are the two biggest in per capita CO 2 emissions from the energy consumption. Their annual averages of CO 2 emissions from the consumption are 46.05% and 27.57% respectively. We thus conclude that if the use of renewable energy increases, the rate of per capita CO 2 emissions will decrease. One of the solutions proffered in the sustainability and improvement of the energy market is the use of renewable energy. But the pressing challenge is how to harness it; and how to turn the economy in this region into a sustainable path. The Intergovernmental Panel on Climate Change (IPCC, 2011) reveals that the relatively share of renewable energy can be attributed not only from a single resource, but to the deployment of a number of renewable resources. As with the rest of the global community, MENA's rich-endowment of renewable energy resources far exceeds its annual energy needs. In 2010, the region's energy demand was approximately 1,121 TWh.
By 2050, this demand is approximately projected to reach 2,900 TWh (Fichtner, 2011). But only recently, renewable resources across the region have been accorded priority. Governments of the MENA countries make efforts to use this potential in order to acquire additional technological improvements, cost reductions, and the adoption of favorable policy regimes. The use of renewable energy (hydro, wind, biomass, geothermal, and solar) seems the greatest solution to reduce the severity of the environmental problems, to ensure the improvement of social-welfare, and to innovate and advance the green-technology of the industrials firm's payoffs.

LITERATURE REVİEW
Few studies have focused on the connection between renewable energy consumption, economic growth and CO 2 emissions (Sadorsky, 2009;Apergis et al., 2010;Menyah and Wolde-Rufael, 2010). Sadorsky (2009) Bhattacharya et al. (2017) suggest that, from 85 developed and developing countries, both renewable energy deployment and institutions play a significant role in stimulating economic growth and reducing CO 2 emissions. For a panel of twentyfiveselected African countries, Zoundi (2017) recommend that CO 2 emissions are found to increase with income per capita. Ito (2017) suggest that, for a panel of forty-two developed countries, non-renewable energy consumption leads to a negative effect on growth for developing countries. In the long-run, renewable energy consumption positively contributes to economic growth. Previous studies have been examined in order to highlight the contribution of each variable to the evolution of CO 2 emissions, but by considering different sets of variables under consideration. In previous empirical studies, different statistical approaches and econometric methods are used (two steps generalized method of moments (GMM), fixed effect regression, PVAR, autoregressive distributed lag (ARDL) model, Granger causality, etc.) either for the case of panel or time series. From previous studies, the findings are different and depend mainly on the methodologies, periods, sample sizes and countries. The directions of both long and shortrun causalities among the variables have been examined in many studies. Table 2 summarizes some previous empirical studies and presents their contributions according to the methodology, variables, samples and the period used, which are discussed under growth pollution nexus and renewable energy pollution nexus.

Growth-pollution Nexus
For the case of Algeria, Bouznit and PabloRomero (2016) considered the ARDL approach to examine the validity of the Environmental Kuznets Curve (EKC) hypothesis over the period 1970-2010. The results showed that the EKC hypothesis is thus validated and that increasing economic growth in Algeria has increased emissions. Ahmad and Du (2017) adopted the ARDL bound approach to investigate the dynamics existing between energy production, CO 2 emissions and economic growth in Iran. Although the production of energy positively has contributed to economic growth, CO 2 emissions are positively linked to economic growth. Adopting a dynamic-panel model based on the GMM technique, Jalil (2014) investigated the determinants of CO 2 emissions in 18 MENA countries for the period 1971-2009. Their results showed that real GDP, fossil fuel energy consumption, FDI and agriculture production had significant effects on CO 2 emissions.

Renewable Energy-pollution Nexus
Various empirical studies have critically examined the role renewable energy consumption may contribute in mitigating CO 2 emissions in the world. Empirical studies have found that renewable energy use can decrease in CO 2 emissions. Table 3a and b reports some studies that investigated the renewable energy-pollution nexus. Apergis and Payne (2014) examine the determinant of renewable energy for a panel of seven Central-American countries. The results from their estimation suggest that a long run relationship exists between carbon emissions per capita, renewable energy consumption per capita, real coal prices, real GDP per capita and real oil prices with the respective coefficients statistically significant. Jebli and Youssef (2015) employed the Granger-causality test and the panel cointegration approach for a group of North-Africa countries for the period 1971-2008. Their findings suggest the existence of a unidirectional short-run causality running from renewable energy consumption to CO 2 emissions. For a panel data set of seventeen OECD countries, Bilgili et al. (2016) use panel DOLS and FMOLS estimations. The results revealed that renewable energy consumption yields negative impact on CO 2 emissions. Bölük and Mert (2015) use the ARDL approach to examine the potential of renewable energy sources in reducing the impact of GHG emissions in Turkey. The results show that the coefficient of electricity production as generated from renewable sources with respect to CO 2 emissions is negative and statistically significant in the long-run.

MATERIALS AND METHODS
The study takes a step further to investigate empirically the relationship between renewable energy, carbon emission and economic growth; evidenced for a balanced panel of 8 MENA countries for the period 1990-2018, generated from the World Bank (2019) database and the BP statistical Review of World Energy (2019) database. Data used are for the variables per capita GDP (constant 2010, PPP), a proxy for economic growth, CO 2 emission per capita (metric tons per capita) and renewable energy consumption (REW), expressed as the share of consumption from renewable energy sources in total final energy. All the variables are transformed into natural logarithm so as to obtain unbiased and consistent results by overcoming the heteroscedasticity problem among the variables (Vogelvang, 2005;Shahbaz et al., 2012;Salahuddin et al., 2015). The 8 MENA economics included in the sample are: Algeria, Egypt, Iran, Israel, Jordan, Lebanon, Morocco and Tunisia. These countries were selected based on data availability on the variables on interest. The model to be estimated is succinctly hinged on the simple Cobb-Douglas production framework, which is shown to be a function of capital (K) and Labour (L), written as; Previous studies (Ismail and Mawar, 2012) included energy, N, as the third factor of production function, thus equation (1) is augmented to be; For modeling purposes, this paper adopts a Cobb-Douglas production function; Where β, θ and η, represents output elasticity to changes in capital, energy and labour; where β+θ+η=1. Converting equation (1) Where In GDP pcapit represents gross domestic product per capita; In K it represents capital formation; In L it represents labour participation; In E it represents renewable energy; In CO2 it represents per capita Greenhouse gas emission; u it represents the error term assumed to be normally distributed with zero mean and constant variance.

EMPIRICAL RESULTS
The analysis begins with the summary statistics of variables used in the sample of 8 MENA countries which is presented in Table 4. Then we investigate the variables time series plots (in logarithm form) for each country. Figure 2 shows the time plots of renewable energy consumption for each of the countries. On the average, Morocco is the biggest  Figure 3 show the time series plots of GDP per capita for each country. In fact, most countries have experienced increased GDP per capita for the period under study. Israel has the biggest GDP per capita size, followed by Algeria, while Morocco is at the bottom of the ladder. Figure 4 shows the time series plot of carbon emission per capita. On the average, Israel has the highest CO 2 emission overt the period, followed by Iran, while Morocco is at the tail end of the emission ladder. Table 5 shows the average annual growth rates for each variable over the period 1990-2018. We can deduce that the annual growth rate for renewable energy consumption vary between countries and ranges from as low as -1.976 in Egypt, to as high as 9.235 in Algeria. For all countries used for this study do not exceed 5% per year except for Algeria. This result confirms that most of the aforementioned countries have not yet sufficiently invested in green technologies using renewable energy. In fact, some countries such as Egypt, Iran, Lebanon, Morocco and Tunisia stand out for having high growth rate per capita. Succinctly, the average annual growth rate of renewable energy consumption in these countries is similar to their average annual GDP per capita growth rate. In       Algeria, Iran and Jordan, the average growth rate for renewable energy consumption tends to grow more rapidly culminating in a positive average growth rate of CO 2 emission. Also, negative growth rate of renewable energy in Lebanon, Morocco and Tunisia also produce positive CO 2 emission. Only Israel generates negative growth rate of CO 2 emission, which is traceable to a positive annual growth rate of renewable energy.

Panel Unit Root Analysis
In this paper, the panel unit root tests are computed in order to assess the stationarity of variables including Levin et al. (2002) and Im et al. (2003) test. Levin et al. (2002) proposes a panel based on augmented Dickey-Fuller (ADF) test that assumes homogeneity in the dynamics of the autoregressive coefficients for all pane units with cross sectional independence. The following equation is considered; Where ∆ is the first difference operator, Y it is the dependent variable, µ it is a white-noise disturbance with a variance, i represents indexes country, and t represents indexes on time. The test involves the null hypothesis (H 0 :η i =0) for all i against the alternative (H 0 :η i ≠0) for all i. Im et al. (2003) test is not restrictive as Levin et al. (2002)  ,..., The results of the unit root test in Table 6 indicate that each variable is integrated of order one, I(1).

Panel Cointegration Test
We employ the Pedroni (2004) cointegration test. The panel cointegration test result of Pedroni (2004) is presented in Table 7. Pedroni proposes two cointegration tests based on the within approach which include four statistics (panel test) and the between approach which includes three statistics. However, the Pedroni cointegration test is based on the residuals and variants of Phillips and Perron (PP, 1988) and Dickey and Fuller (ADF, 1979). The Pedroni's cointegration result indicates that we reject the null-hypothesis of no cointegration at 5% significant level, which implies that there exist a long run relationship between renewable energy, carbon emission and economic growth in MENA countries.

Panel Fully Modified OLS and Dynamic OLS
Although, OLS estimators of the cointegrated vectors are convergent, their distribution is asymptotically biased and thus depends on nuisance parameters connected with the presence of serial correlation in the series (Pedroni, 2001). Such problems, existing in the time series arise for the panel data and tend to be more pronounced even in the presence of heterogeneity. In carrying out tests on the cointegrated vectors, it is necessary to use an effective estimation technique. Various techniques exist such as the fully modified ordinary least square (FMOLS) as initially suggested by Phillips and Hansen (1990) or the dynamic ordinary least square (DOLS). In the case of the panel data, these two techniques lead to normally distributed estimators, implying that both the OLS and FMOLS exhibit small-sample bias and that DOLS estimator appears to out-perform both estimators Moon, 1999 andPedroni, 2001). Thus our empirical model is based on the regression analysis between the three variables as evident in equation 4.  Table 8, it is evident from the FMOLS that GDP has positive and significant impact on renewable energy for countries such as Algeria, Iran and Jordan, while it exhibited negative and significant impact in Egypt and Tunisia. From the DOLS, GDP showed a positive and significant impact on renewable energy    Source: Author's computation using E-views 10. ** , ***Denotes significant at 5% (10%) level; t-statistics in parenthesis consumption in Jordan only and a negative and significant effect in Tunisia.
As regards CO 2 emission-renewable energy consumption relationship, it is observed that from the FMOLS, there was a positive and significant relationship in Egypt only, while Jordan and Tunisia exhibited negative and significant relationship. Under the DOLS, for countries such as Algeria, Iran, Israel, and Jordan, CO 2 emission exhibited negative and significant effect on renewable energy consumption. Under both the FMOLS and DOLS panel results, with renewable energy as dependent variable, we find out that the elasticity of CO 2 emission exhibits negative effect at 5% significant level. This implies that with the increase in CO 2 emission, demand for renewable energy decreases. Furthermore, the results proves that most of the aforementioned countries do not utilize renewable energy mainly as a result of the investment cost in green technologies; as such government do not encourage their respective economies to adopt clean technologies using renewable energy. Table 9 shows the relationship between renewable energy, GDP and CO 2 emission. From the Fully Modified OLS, it is evident that renewable energy shows negative relationship to carbon emission. Thus implies that renewable energy consumption plays a vital role in decreasing CO 2 emission. Critically, GDP in most of the countries triggers significant increase in CO 2 emission as evident from both the FMOLS and DOLS.

CONCLUSION AND POLICY IMPLICATION
In this paper, we have examined the relationship among renewable energy, CO 2 emission and GDP in 8 MENA countries from 1990 to 2018. To specify what matter, the study adopted the panel unit root test, cointegration test and the FMOLS/DOLS test. Our panel cointegration results reveal the existence of panel long run equilibrium between renewable energy, CO 2 emission and GDP. An important emerging result from the analysis is that renewable energy consumption plays a vital role in lowering CO 2 emission. Furthermore, we can say that policies in these countries may stabilize output and income while attempting to consume more efficient energy. As such policy makers should then take it into consideration the degree of output (growth) in each country when renewable energy policy is formulated. In this case, policy makers should encourage a multilateral effort in promoting and increasing output in each country where renewable energy and thus reduce CO 2 emission in the region.
Regional cooperation on the development if renewable energy markets between public and private sector stakeholders could begin with sharing fundamental information across countries with respect to technologies as well as financing and investment strategies (Apergis and Payne, 2010) In addition, pollution can be reduced if governments improve the industrial sector by importing cleaner technology to attain maximum benefit from international trade (Shahbaz et al., 2012;Tiwari et al., 2013) and also implement effective economic and financial development policies which improves the environment, which will help in redirecting resources to environmental friendly projects.