The Impact of Renewable Energy Consumption on Economic Growth in Bangladesh: Evidence from ARDL and VECM Analyses

Abstract

In pursuit of achieving developed country status by 2041, Bangladesh is committed to comprehensive socioeconomic development—a goal intrinsically tied to the critical task of securing a reliable, uninterrupted energy supply while optimizing utilization of available energy sources. This study used 1980–2018 annual data to examine the implications of energy transition and causal relationships among economic growth, renewable energy, and natural gas consumption in Bangladesh. A rigorous two-step process investigated the causal correlations among variables. The autoregressive distributive lag (ARDL) model was used to scrutinize long-term relationships, while a vector error correction (VEC)model was used to ascertain the directionality of these causal relationships. The outcomes of the bound tests conclusively revealed the presence of a long-run equilibrium relationship among the variables. Causality analyses indicated a unidirectional causal relationship from renewable energy consumption to economic growth in the long run and from natural gas consumption to economic growth in the short run. A bidirectional causal relationship was found between natural gas and renewable energy consumption in the long run. These findings underscore the potential of energy conservation strategies to catalyze economic growth and suggest an avenue for Bangladesh to achieve its ambitious socioeconomic development goals.