Renewable Energy, Industrialization, and Economic Growth: Evidence from CIVETS Economies

Abstract

This study examines the relationship between renewable energy consumption, manufacturing value added, carbon emissions, and economic growth in CIVETS economies over the period 2005 to 2025. Grounded in neoclassical growth theory, environmental economics, and structural transformation theory, the study evaluates how industrial expansion and environmental factors interact to influence economic performance. A quantitative panel data approach is employed, utilizing panel least squares, fixed effects, and random effects models, along with diagnostic tests such as the Breusch–Pagan Lagrange Multiplier and Chow tests to determine the most appropriate model specification and account for time and cross-sectional dynamics. The empirical findings reveal that manufacturing value added has a positive and statistically significant effect on economic growth across all model specifications, confirming the central role of industrialization in driving productivity, employment, and structural transformation in emerging economies. Carbon emissions exhibit a negative but generally insignificant relationship with economic growth, suggesting that environmental degradation may impose constraints on growth, although the effect is not consistently robust. Renewable energy consumption shows a positive but statistically insignificant impact, indicating that while clean energy contributes to sustainability, its short-term influence on economic performance remains limited due to transitional costs, infrastructure constraints, and incomplete integration into industrial systems. The findings emphasize the need for policies that promote green industrialization by integrating renewable energy into manufacturing processes, strengthening environmental regulations, and supporting technological innovation to achieve sustainable long-term economic growth.