INVESTIGATING THE NEXUS OF ECONOMIC GROWTH, ENERGY CONSUMPTION AND CARBON EMISSIONS IN SOUTH AFRICA:EVIDENCE FROM COINTEGRATION AND CAUSALITY ANALYSIS

Abstract

The economic forecast for South Africa is expected to be moderately positive, marked by rapid population growth, an emerging middle-income status, elevated energy consumption, and considerable energy emissions. Grasping these interrelations is crucial for informing suitable policy choices. This study investigates the long-term and short-term relationships between economic growth, energy use, emissions, capital formation, and labour in South Africa from 1970 to 2023. This research aims to explore the causal link between energy consumption, economic growth, and CO2 emissions using a VECM framework. Results show a stable long-run relationship where increases in labour and capital significantly boost GDP, but rising emissions severely hamper growth. Energy consumption alone is not statistically significant. The adjustment speed to shocks is slow, with only 0.63% correction per period. Short-run analysis indicates capital formation influences immediate output changes, while growth weakly affects energy demand, supporting a growth-driven model rather than an energy-driven one. Diagnostic tests confirm model stability and reliability. The findings suggest that sustainable development depends on modernizing the energy grid and reforming structural components to utilize labour better.