Energy Policy 102 (2017) 277–287

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Energy Policy
journal homepage: www.elsevier.com/locate/enpol

Environmental degradation, renewable and non-renewable electricity MARK

consumption, and economic growth: Assessing the evidence from Algeria
⁎
Fateh Bélaïda, , Meriem Youssefb
a
University of Paris-Est, Scientific and Technical Center for Building, 84 Avenue Jean Jaurès, Champs-sur-Marne, 77447 Marne-la-Vallée cedex 2, France
b
University of Sousse, LaREMFiQ - IHEC, B.P. 40 - Route de la ceinture - Sahloul III, 4054 Sousse, Tunisia

A R T I C L E I N F O A BS T RAC T

Keywords: The imperative to reduce CO2 emissions is stronger than ever and investment in renewable energy is one of the
Renewable and non-renewable electricity most viable options to reduce the carbon footprint. This article explores the dynamic causal relationship
consumption between CO2 emissions, renewable electricity consumption, non-renewable electricity consumption and
CO2 emissions economic growth in Algeria by using Autoregressive Distributed Lag Cointegration approach over the period
Economic growth
1980–2012. The empirical results confirm the existence of cointegration long-run relationship among the
Granger causality
variables. We find that, in the long-run, economic growth and non-renewable electricity consumption have a
Algeria
detrimental effect on the environment quality, whereas renewable energy use has a beneficial environmental
effect. Furthermore, in the short-run, results reveal unidirectional causality relationship running from GDP to
NREC, supporting the conservation hypothesis, i.e. electricity consumption is dictated by economic growth. The
results suggest broadly that renewable electricity consumption can help to enhance environmental quality in
Algeria. But so far, renewable electricity generation has not reached a level that allows a significant contribution
to energy-based carbon dioxide emissions reduction target.

1. Introduction dependence of the Algerian economy on oil revenues and prices of

Nowadays, energy consumption accounts for 80% of CO2 emissions
which are the major source of global warming and represent the most
dangerous effects of climate change. Then, it is indisputable that any
effort to effectively reduce CO2 emissions and mitigate climate change
must include the energy sector (IEA, 2015).
Moreover, increasing global warming impact the way governments
around the world approach energy related environmental issues. As a
result, promoting sustainable development and tackling climate change
have become fundamental aspects of both short-run and long-run
energy planning and policy making (IEA, 2015).
With the rising concerns over the environmental consequences of
CO2 emissions from fossil fuels, renewable energy has emerged as an
alternative source of energy (Apergis and Payne, 2012). According to
the IEO (2015), renewable energy is intended to be the fastest
enlarging world energy source. Specifically, renewable electricity gen-
eration will increase by 72% from 2013 to 2040, representing more
than one-third of new generation capacity.
The prevalence of such problems is higher in countries such as
Algeria, where environmental sustainability, energy security and
economic growth are simultaneously important. In fact, the strong
fossil fuels raises several questions for future economic, environmental
and energy policies (Bélaïd and Abderrahmani, 2013).
Since 1970, Algeria has experienced a fast economic growth due to
its fossil fuel resources. The Algerian economy remains an oil-based
economy and comprises energy intensives sectors such as building and
transportation. Therefore, total electricity consumption is increasing
rapidly. Electricity consumption reached 40.9 TWh in 2013, is ex-
pected to average about 75–80 TWh in 2020 and 130–150 TWh in
2030. Electricity demand is projected to increase at an average annual
growth rate of 6%. This underlines the importance of electricity
consumption as a crucial component of the economic growth for
Algeria.
Algerian economy has benefited from rising energy prices over the
period 2007–2013. However, Algeria has struggled to develop non-
hydrocarbon industries, diversifying the economy and creating private
sector jobs because of heavy regulation and an emphasis on state-
driven growth. Additionally, much of oil revenue has been oriented to
public sector expenditure in order to maintain stability through a
combination of minimal political reforms and generous social spend-
ing. The government maintains large subsidies (subsidies represent
30% of GDP) such as electricity, cooking gas, food, education, housing,

⁎
Corresponding author.
E-mail addresses: Fateh.BELAID@cstb.fr, fateh.belaid@univ-littoral.fr (F. Bélaïd), youssef.sorbonne@gmail.com (M. Youssef).

http://dx.doi.org/10.1016/j.enpol.2016.12.012
Received 11 July 2016; Received in revised form 25 November 2016; Accepted 5 December 2016
0301-4215/ © 2016 Elsevier Ltd. All rights reserved.
F. Bélaïd, M. Youssef
etc. Furthermore, the dramatic drop in oil prices since mid-2014 has an
obvious effect on the Algerian economy, according to statistics pub-
lished by the Algerian Ministry of Finance, Algeria's oil and gas export
revenues, which account for around 95% of the total, have fallen by a
whopping 41% in 2015 to $35.72 billion from $60.3 billion in 2014. In
line with the slump in global oil prices, growth slowed to 2.9% in 2015
from 3.8% in 2014.
In contrast, Algeria's reserves for both oil and gas has been on a
downward path since 2005 due to a lack of investment in upgrading
existing fields and exploiting new discoveries, while the rise in domestic
energy consumption has come at the expense of declining oil exports.
Steadily increasing in energy domestic demand in recent years was
driven by both demographics as well as by largely sustained economic
activity. A challenge for Algeria is then to reduce dependence on fossil
fuels by developing renewable energy before the fateful date of
exhaustion of the fossil energies. CO2 emissions in Algeria have
gradually reached a high level due to over-use of energy resources.
According to the WBG (2015), total Carbon dioxide emissions in
Algeria reached 78,925 thousand metric tons in 1990 and increases
to reach 121,755 thousand metric tons in 2011.
Given these environmental constraints, in order to reduce CO2
emissions related to energy consumption, renewable energy production
and environmentally friendly energy conversion technologies become a
priority in Algeria. A process of shifting to green power and an
ambitious program to develop renewable energy (RE) was launched
in 2001.
According to the renewable energy policy network report (REPN,
2015), Algeria is the third largest investor in renewable energy in
Africa. Since 2004, Algeria was the only country on the continent with a
feed-in policy in place. Whereas, as of early 2015, only eight African
countries had enacted such policies. In addition, the country revised its
energy plan to take a series of actions in the long run and adopt new
renewable energy goals to be achieved by 2030 (REPN, 2015).
The main goal behind these strategies is to reach the optimal model
of rational consumption and exploitation of fossil resources. For
example, forecasts intend the volume of natural gas will be saved by
the 22 GW of renewable energy which is equivalent to eight times the
national consumption in 2014. The Algerian government intend that
renewable energy will supply 40% of its electricity needs by 2030
(Nacer et al., 2016).
To the best of our knowledge, this paper presents the first known
application of ARDL modeling approach for the examination of the
dynamic link between renewable and non-renewable electricity con-
sumption-carbon emissions-GDP in Algeria. The choice of Algeria for
this research is also motivated by the fact that Algeria is facing several
energy and environmental challenges, including high demand of energy
while the supply is decreasing, large dependence on fossil fuel, high
volatility of oils prices and severe negative effects of energy-based
carbon emissions on the environmental quality.
In fact, Algeria's energy demand is experiencing steep consumption
rates, with growth of 8–10% annually. Steadily increasing in energy
domestic demand in recent years driven by both demographics as well
as by largely sustained economic activity. Furthermore, CO2 emissions
from energy use have increased by 5%/year since 2000, reaching 125
Mt in 2014. In this context understanding the casual links between
such variables can help to better guide the needed energy sector and
economic transformation for the country and more generally for
countries behaving similarly.
This study is in line with earlier work by Bélaïd and Abderrahmani
(2013) who analyzed the causal relationship between electricity con-
sumption, crude oil price and economic growth in Algeria. In embark-
ing in this path, this research develops an ARDL Bounds testing
procedure which allows the long-run estimation without requiring
pre-testing the time-series for the presence of unit roots in the data
generating process incorporated in the cointegration model.
In addition to the introductory section (Section 1), the remainder of
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Energy Policy 102 (2017) 277–287
this paper is build up as follows: Section 2 presents the theoretical
background and the state of the art dealing with literature on the
subject of energy consumption, economic growth and pollutant emis-
sions. Section 3 provides an overview of renewable energy in Algeria.
Section 4 describes the data and the econometric methodology. We
report our empirical findings and discuss their implications in Section
5. Section 6 concludes the paper with a summary of the main findings
and provides some policy implications based on the empirical results.
2. Literature review
An impressive body of literature have dealt with the dynamic
causality between electricity consumption, CO2 emissions and econom-
ic growth (Salim et al., 2014). Three main views have emerged in the
literature. The first strand is related to the relationship between
economic growth and electricity consumption. Economic growth and
electricity consumption nexus is a very well studied topic in the
literature. Pioneered by the seminal work of Kraft and Kraft (1978),
many other studies emerged, employing the Granger causality and
cointegration model, as a new empirical tool to study this kind of
purpose for different countries (for example, Chandran et al. (2010),
Bélaïd and Abderrahmani (2013), Khalid (2015)). However, emanating
results show that there is no consensus and causality direction between
the series differ from one country to another. According to Bélaïd and
Abderrahmani (2013) the heterogeneous feature in the results are
mainly due to the specific nature of the country's economic policy,
energy resources, different periods that data cover and the methodo-
logical approach employed to test causality. In this first strand of
research, there is a very limited number of studies on the economic
growth and electricity consumption nexus in Algeria. Bélaïd and
Abderrahmani (2013) examine the causal relationship between eco-
nomic growth and electricity use in Algeria over the period of 1971–
2010. Using a multivariate cointegration approach, they find both
short-run and long-run bidirectional causality between the series. Their
findings lay emphasis on electricity consumption as a prerequisite of
achieving higher economic growth for Algeria. A high level of economic
activity leads to a high level of electricity demand.
The second strand focuses on the causality between economic
growth and pollutant emissions. It is linked to testing the validity of
the environmental kuznets curve (EKC) hypothesis of an inverted U-
shaped relationship between CO2 emissions and economic growth.
According to the EKC hypothesis, CO2 emissions increase with an
increase of the economic growth until reaching a threshold, and after
that decline with the economic growth beyond this threshold. Since the
seminal work of Grossman and Krueger (1991), who were the first to
test the EKC hypothesis to analyze the relationship between the income
per capita and environmental degradation, many other studies
emerged. A long-run and inverted U-shaped linkages between CO2
emissions and economic growth were examined in the following studies
realized for different countries like Algeria (Lacheheb et al., 2015),
Tunisia (Fodha and Zaghdoud, 2010), Malysia (Saboori et al., 2012),
Turkey (Halicioglu, 2009), Iran (Asghari, 2012) and Saudi Arabia
(Alshehry, 2012; Alkhathlan et al., 2012).
Some of these studies have also explored Granger causality between
economic growth and CO2 emissions. However, the empirical results
look to be controversial. In fact, Saboori et al. (2012) find a long-run
unidirectional causality running from carbon emissions to economic
growth. Fodha and Zaghdoud (2010) report a unidirectional causality
running from economic growth to CO2 emissions. Lacheheb et al.
(2015) study the dynamic causality between economic growth and CO2
emissions and the existence of the (EKC) hypothesis in Algeria, over
the period 1971–2009. They find that in the long-run, economic
growth affect significantly CO2 emissions and confirm the non ex-
istence of the (EKC) hypothesis in the case of Algeria.
Finally, the third strand combines the two previous lines of research
into the study of causal link between economic growth, energy
F. Bélaïd, M. Youssef Energy Policy 102 (2017) 277–287

Table 1
Summary of the existing studies and findings on the energy (electricity) consumption, economic growth and CO2 emissions nexus. We focused on countries having the same
specifications as Algeria (MENA countries, particularly countries that are relying in resources especially Oil and Gas and having the same GDP).

Author (s) (year) Country Period Series Methodology Causality (long-run)

Farhani et al. (2014) Tunisia 1971–2008 E, GDP, ARDL, GDP → CO2

CO2 GC E → CO2

Chebbi (2009) Tunisia 1971–2004 E, GDP, VECM, IRF CO2 → GDP

CO2 GDP → E

Alshehry and Belloumi (2015) Saudi Arabia 1971–2010 E, GDP, JC, GC E → GDP
CO2 VECM GDP ↔ CO2
E → CO2

Alkhathlan and Javid (2013) Saudi Arabia 1980–2011 E, GDP, ARDL, GDP ↔ CO2
CO2 GC GDP ↔ E
CO2 ↔ E

Shahbaz et al. (2014) United Arab 1975–2011 EL, GDP, ARDL, VECM EL ↔ CO2
Emirates CO2 GDP → CO2
GDP → EL

Sbia et al. (2014) United Arab 1975–2011 E, GDP, VECM, GC, GDP ↔ CO2
Emirates CO2 ARDL E ↔ CO2

Lotfalipour et al. (2010) Iran 1967–2007 E, GDP, Toda & Yamamoto procedure GDP → CO2
CO2 GC E → CO2

Ozturk and Acaravci (2010) Turkey 1968–2005 E, GDP, ARDL, GC GDP → CO2
CO2

Menyah and Wolde-Rufael (2010) South Africa 1965–2006 E, GDP, GC, ARDL CO2 → GDP
CO2 E → GDP
E → CO2

Saboori and Sulaiman (2013) Malaysia 1980–2009 E, GDP, ARDL, VECM GDP ↔ CO2
CO2 E → CO2

Ang (2008) Malaysia 1971–1999 EL, GDP, VECM, GC CO2 → GDP

CO2 GDP ↔ EL

Arouri et al. (2012) 12 MENA 1981–2005 E, GDP, Bootstrap panel, GDP → CO2
countries CO2 cointegration

Farhani and Rejeb (2012) 15 MENA 1973–2008 E, GDP, Panel cointegration methods, GDP → E
countries CO2 Panel causality CO2 → E

Omri (2013) 14 MENA 1990–2011 E, GDP, Simultaneous GDP ↔ E

countries CO2 equations models E → CO2
GDP ↔ CO2

Farhani and Shahbaz (2014) 10 MENA 1980–2009 EL, GDP, Panel cointegration methods, GDP → CO2
countries CO2 Panel causality EL → CO2

Ozcan (2013) 12 Middle East 1990–2008 E, GDP, Panel data E → CO2

countries CO2 GDP → CO2
CO2 GDP → E

Note: In ‘Series’ column GDP, EL, E and CO2 refers to gross domestic product, electricity consumption, energy consumption and CO2 emissions, respectively. In ‘Methodology’ column
GC, VECM, JC, IRF and ARDL denote Granger causality, vector error correction model, Johansen cointegration, impulse response function and autoregressive distributed lag procedure,
respectively. The sign → indicates unidirectional causal relationship between the series, whilst ↔ denotes bi-directional causality.

consumption and pollutant emissions. This issue has been addressed
by several researchers for different countries. Empirical results differ
from one country to another. Applying a multivariate model Zhang and
Cheng (2009) analyzed the causal relationship between economic
growth, energy consumption and carbon emissions in China over the
period 1960–2007. Using vector autoregression (VAR) and error
correction model (ECM) they find two unidirectional Granger causality
between the variables in the long-run. The first unidirectional Granger
causality is running from GDP to energy consumption and the second
is running from energy consumption to CO2 emissions. Intensive
energy consumption increases significantly the level of CO2 emissions
and consequently the environmental degradation in China.
Shahbaz et al. (2014) used a plethora of recent techniques in time
series econometrics such as the VECM Granger causality, to determine
the direction of causality between economic growth, electricity con-
sumption and CO2 emissions in United Arab Emirates for the period
1975–2011. They prove the existence of EKC hypothesis between the
variables. They provide support for bidirectional causality between
electricity consumption and CO2 emissions and unidirectional causality
running from economic growth to both CO2 emissions and electricity
consumption.
Alkhathlan and Javid (2013) utilized autoregressive distributed lag
approach to explore the multivariate dynamic relationships among CO2
emissions, GDP and energy consumption in Saudi Arabia during the

279
F. Bélaïd, M. Youssef
period 1980–2011. Their results indicate that CO2 emissions increase
with the increase in per capita income and suggest that electricity
consumption is less polluting than other sources of energy.
More recently, Alshehry and Belloumi (2015) applied a range of
recent advances in time series to examine the multivariate dynamic
relationships among CO2 emissions, GDP and energy consumption in
Saudi Arabia over the period 1971–2010. They find that the growth
hypothesis is verified for Saudi Arabia. In addition a bidirectional long-
run causality between GDP and CO2 emissions and a unidirectional
long-run causality running from energy consumption to CO2 emissions
are found.
However, limited research has been conducted on the nexus
between renewable electricity consumption, economic growth and
carbon emissions, especially for Middle East and North African
countries (MENA). Recently, new line of research has focused on the
relationships between renewable energy consumption, economic
growth and pollutant emissions. Nonetheless, very few recent studies
focused on the decomposing effects of electricity consumption into
renewable and non-renewable electricity consumption such as Menyah
and Wolde-Rufael (2010), Salim et al. (2014) and Jaforullah and King
(2015).
Sbia et al. (2014) analyzed the impact of foreign direct investment
on energy consumption by incorporating renewable energy, trade
openness, CO2 emissions and economic growth in energy demand
function, in United Arab Emirates. They explored the causal relation-
ship between economic growth, energy consumption and carbon
emissions using a long quarterly data which cover the period from
1975Q1 to 2011Q4. Using autoregressive distributed lag (ARDL) and
error correction model (ECM) they find, among other results, two
bidirectional Granger causality between the variables in the long-run.
The first bidirectional Granger causality is between carbon emissions
and economic growth. The second bidirectional Granger causality links
energy consumption to CO2 emissions.
Farhani and Shahbaz (2014) explored the causal relationship
between renewable and non-renewable electricity consumption, eco-
nomic growth and CO2 emissions for 10 Middle East and North Africa
(MENA) countries over the period of 1980–2009. Their short-run
dynamics reveal the unidirectional causality running from renewable
and non-renewable electricity consumption and economic growth to
CO2 emissions. In the long-run, the find a bidirectional causality
between electricity consumption (renewable and non-renewable) and
CO2 emissions.
Table 1 illustrates some earlier relevant studies analyzing the causal
relationship between CO2 emissions, energy consumption and econom-
ic growth as well as their main features, employed methodology and
main findings. We focused on countries having the same specifications
as Algeria, MENA countries, particularly countries that are relying in
resources especially Oil and Gas and having the same GDP.
Table 1 show that findings of the literature review on the causal
relationship between CO2 emissions, energy consumption and econom-
ic growth differ from one country to another stressing a persistence of
ambiguity among the results.
However, to our knowledge, in this strand no studies are done to
explore the causal relationship between renewable and non-renewable
electricity consumption, economic growth and pollutant emissions in
Algeria. The following empirical study is a contribution to fill this
omission in existing energy literature for the case of Algeria.
3. Renewable electricity in Algeria: an overview
Algeria is the third-largest oil producer in Africa, after Nigeria and
Angola, and the leading natural gas producer in Africa. Moreover,
Algeria has one of the greatest reserves of natural gas and oil in the
world, estimated at 4.51 trillion cubic meters of natural gas and
12.2 billion oil barrels. Furthermore, Algeria is estimated to hold the
third-largest amount of shale gas resources in the world. According to
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Energy Policy 102 (2017) 277–287
the U.S. Energy Information Administration Algeria contains 707 tril-
lion cubic feet (Tcf) and 5.7 billion barrels of technically recoverable
shale gas and oil resources, respectively. However, production of both
oil and natural gas has been on a downward path since 2005 due to a
lack of investment in upgrading existing fields and exploiting new
discoveries and repeated project delays resulting from slow govern-
ment approval, technical problems and infrastructure gaps.
The Algerian potential capacity of renewable energy (solar and
wind) that can be harnessed by commercially available technologies is
enormous. Meanwhile, the electricity generation mix is still predomi-
nated by fossil fuels, especially natural gas (93%) and the renewable
energy is poorly exploited. Electricity generation from renewable
sources in Algeria's energy mix was negligible until the recent
introduction of 150 MW hybrid solar/gas power plant in Hassi-Rmel
(south Algeria) (Nacer et al., 2016). The goal is to reach a contribution
of about 6% of the electricity production by 2015 through the
photovoltaic, solar thermal and wind sources.
The Algerian electricity system is composed of many generation
sources, such as gas, oil, solar, wind and other renewable sources.
However, about 98% of Algeria's electricity generation rests on fossil
fuel sources. Especially, over 92.4% of the Algerian electricity produc-
tion are derived from natural gas and 6.5% from oil (WBG, 2015). The
Algerian Ministry of Energy and Mines has set ambitious goals for
electricity generation, aiming to generate 40% from renewable sources
by 2030 (Nacer et al., 2016). The electricity market is almost entirely
held by the national company SONELGAZ, which manages the
electricity system and provides local electricity and gas distribution.
Coverage of the country by the power grid is at 98% (34% in 1970) with
a capacity of 11.325 MW through 2009. This network has over 6.5
million customers. Since 1995, electricity generation increased con-
siderably in Algeria (as shown in Fig. 1). According to SONELGAZ, the
country's public utility in charge of electricity generation and distribu-
tion, Algeria's electricity generation capacity reached 15.2 GW at the of
2014, up from 12.9 GW at the end of 2012 and 11.4 GW at the end of
2011.
The price of electricity in Algeria is one of the lowest prices in the
Middle East and North Africa region (MENA), especially for residential
customers, it was fixed to 2.2 dinar/kWh (equivalent to 0.027 $/kWh)
in 2005.
During the previous years, Algeria's electricity demand has been
increasing rapidly, mainly due to expansion of economic activities and
population growth. Net electricity consumption was 45 billion kilowatt
hours in Algeria in 2014. From 2008–2014, Algeria's electricity
consumption has increased by an annual average of roughly 8% (EIA,
2014). According to the WBG (2015), in 2011 per capita consumption
Fig. 1. Electricity generation in Algeria.
F. Bélaïd, M. Youssef Energy Policy 102 (2017) 277–287

reached 1091 kWh per person. Forecasts indicate that Algeria's

electricity consumption is projected to rise sharply; it is expected to
reach 75–80 TWh in 2020 and 130–150 TWh in 2030. According to
the national energy balance of 2009, electricity consumption is divided
into three main strands: the Industry Construction & Public Works
(I.CPW); Transport (Tr); Residential and others including agriculture
(R).
Electricity consumption during the 1999–2009 period is fast
increasing for the three sectors. For the residential sector, electricity
consumption is increasing too fast, from 3.134 ktoe in 1999 to 5.524
ktoe in 2008, with an increase of 76.26%. In 2009, this growth
experienced a slight decline of 1.60%, which may be due to climatic
variations. For industry, construction and public works (I.CPW) the
record shows an increase less than that of the residential sector, from
Fig. 3. The Algerian program goals: Contribution of renewable energies for electricity
1.950 ktoe in 1999 to 2.721 ktoe in 2000, this represents a rate of
generation by 2030 (Nacer et al., 2016).
39.60%. The evolution of consumption in the transport sector is not
regular.
84% of the territory and the solar energy potential of Algeria represents
Like the developing countries where energy demand in the resi-
over 60 times the current electrical consumption of the European
dential sector is the highest of all other sectors, in Algeria the
Union.
residential sector is the greatest consumer of electricity. Despite the
The development of renewable energies first gained the interest of
technical progress in equipment with low energy consumption, over
policymakers in Algeria since the mid-eighties. The solar power
40% of total electricity in Algeria is consumed by the residential sector
development was initiated between 1985 and 2000 by the program
(APRUE, 2009).
called the solar energy great south program” that set up the objective to
The over-use of electricity and intensive gas flaring to generate it,
install stand alone PV plants for different applications in remote
are the major causes of CO2 emissions in the country. Fig. 2 underlines
isolated areas such as lighting in rural houses, water pumping,
that since 1970, CO2 emissions increase in Algeria due to fossil fuel
telecommunication repeaters, traffic lighting for 2.000 km in the
production and consumption. For example, in 2013, CO2 emissions
Sahara pathway and small refrigeration systems (Maafi, 2000).
reached 113.87 Mt (EIA, 2015).
Recently, an updated version of the program aims to produce about
In order to meet the increasing electricity demand, one of Algeria's
22.000 MW of renewable electricity from 2015 to 2030, of which
electricity sector main challenges is the ability to integrate renewable
4.500 MW will be implemented by 2020 (see Fig. 3). The distribution
energies into the national energy mix and finance new generation
of this program by technology sector, appears as following:
projects amid fixed electricity prices and energy subsidies.
Algeria is initiating a process of shifting to green power by
• Solar Photovoltaic: 13.575 MW
launching a challenging program of development of renewable energy
• Wind: 5.010 MW
and energy efficiency.
• Solar thermal: 2.000 MW
During recent years, the Ministry of Energy and Mines along with
• Biomass: 1.000 MW
the primary utility in Algeria, SONELGAZ, have been implementing a
• Cogeneration: 400 MW
renewable energy plan with the goal of solar energy constituting about
40% of the electricity generation by 2030 (Nacer et al., 2016), mainly • Geothermal: 15 MW
through concentrated solar power (CSP).
Achieving this program, will provide 40% of total electricity
The renewable electricity potential in Algeria is strongly dominated
production, which will be generated using renewable sources by
by solar electricity, because of high solar radiation. Because of its
2030. The volume of natural gas that will be saved by the
geographical location, Algeria holds one of the highest solar potentials
22.000 MW of renewable electricity is equivalent to eight times the
in the world which is estimated at 13.9 TWh per year. The country
national consumption in 2014.
receives annual sunshine exposure equivalent to 2.500 KWh/m2. It is
Notwithstanding all the efforts to promote renewable energy carried
estimated that only one twentieth (1/20) of the surface of the Sahara
out over the last decade, Algeria continues to lag far behind most
covered with solar panels could supply the entire planet in electricity.
countries in the world in term of solar and wind energy deployment.
Algeria's surface area is 2.381.741 sq km, the Sahara alone accounts for
Although Algeria has begun a few initiatives to promote renewable

Fig. 2. CO2 emissions in Algeria.

281
F. Bélaïd, M. Youssef
energy, generating as much energy from renewable sources as its
current production of fossil fuels is a pipe-dream. The share of
renewable in electricity generation is still very low (less than 1%).
Furthermore, the Algerian program of renewable energy is still at the
pilot phase.
Despite being a hydrocarbon-rich nation, Algeria will have to
understand that fossil energy is coming to an end and that renewable
energy is the main source of future energy. Algeria, with one of the
largest solar fields in the world, is very well placed to be a major player
in the lucrative international market of renewable energy in the coming
years.
Increasing use of renewable energy potential represent a major tool
to strengthen the economic diversification and could bring various
benefits to Algeria, including the reduction of carbon emissions and
enhancing the quality of the environment, diversification of energy
supplies, meeting the rising energy/electricity demand at a lower cost,
freeing up additional exporting volume of oil and gas, and creating new
jobs.
However, transition to more renewable energy use will require an
urgent plan to promote concerted efforts to harness its renewable
energy potential, diversifying power production by increasing genera-
tion from sustainable sources and preserving fossil fuel resources.
In this context, policy makers should encourage more effort to
contain and reorient domestic energy demand and improve energy
efficiency, by committing to a realistic renewable energy program,
which could include the private sector and provide the opportunity for
building a real public/private partnership. Finally, Algeria has a
number of arguments to expand its energy mix and enhance energy
efficiency through the implementation of dynamics of innovation and
technological development. Moreover, to capture more market oppor-
tunities technological development needs to be seen as the keystone of
the national energy policy.
4. Data and methodology
4.1. Data presentation
The annual data used in this research cover the period from 1980 to
2012. The variables used for the model include CO2 emissions (CO2),
total renewable electricity consumption (REC), total non-renewable
electricity consumption (NREC) and real GDP per capita (GDP). The
data on CO2 emissions, renewable and non-renewable electricity
consumption are sourced from the US Energy Information
AdministrationGs database. However, GDP data are obtained from
the World Bank Development Indicators online database.
Fig. 4 provides the distribution of CO2 emissions, renewable
electricity consumption, non-renewable electricity consumption and
economic growth (GDP) in Algeria from 1980 to 2012. The diagram
presented in Fig. 4 suggests that non-renewable electricity consump-
tion and CO2 emissions have similar long-term trends and seem to
grow more quickly from 2002 to 2012. Concerning the non-renewable
electricity consumption and real GDP, Fig. 4 show that beyond 1995
there has been a rapid growth of the two series, which can be explained
by the economic reforms undertaken by Algeria in this period, i.e.
gradual opening up of the Algerian economy and moving toward a
market economy.
4.2. Model specification and modeling approach
We use recently developed cointegration techniques to examine the
relationship between CO2 emissions, renewable and non-renewable
electricity consumption and economic growth in Algeria covering the
period 1980–2012. The study will be based on a standard log-linear
functional form among: CO2, REC, NREC and GDP.
CO2t = β0 + β1 RECt + β2 NRECt + β3 GDPt + εt .
(1)
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Energy Policy 102 (2017) 277–287
Where εt is the error term, CO2 denotes carbon emissions defined
in Million metric tons; REC is total renewable electricity consumption
defined in billion of Kilowatt hours; NREC represents total non-
renewable electricity consumption defined in billion of Kilowatt hours;
GDP denotes the real GDP in billions of constant 2005 U. S. dollars. We
estimate the long-run coefficients of the ARDL model using Eq. (2).
p q1 q2
ln CO2t = β0 + ∑ γi ln CO2t −i + ∑ δj RECt −j + ∑ φm NRECt −m
i =1 j =1 m =1
q3
+ ∑ μr GDPt −r + εt .
r =1 (2)
To explore the short-run dynamics of the respective variables we
estimate the vector error correction model presented in Eq. (3).
p q1
Δ (ln CO2t ) = β0 + ∑ γi Δ (ln CO2t −i) + ∑ δj Δ (RECt −j )
i =1 j =1
q2 q3
+ ∑ φm Δ (NRECt −m ) + ∑ μr Δ (GDPt −r ) + ϑZ t −1 + εt .
m =1 r =1
(3)
Where Δ is the first difference operator, Zt−1 is the error correction
term (ECT), which is derived from the long-run cointegration relation-
ship. It measures the magnitude of the past disequilibrium.
An evaluation of statistical relationships between the above cited
variables involves the following three main steps illustrated in Fig. 5.
4.2.1. Step 1. Unit root test
First, as usual the order of integration of each variable needs to be
established. We use the Zivot and Andrews unit-root test, as it has been
to have better overall performance than the traditional ADF test. The
key advantage of Zivot and Andrews (1992) test is that it takes into
account endogenous structural break in the data.
Shahbaz et al. (2013) pointed out that traditional unit root tests
(Augmented Dickey-Fuller (ADF) and), Philips-Perron (p-P) tests) do
not take into account the structural break in the series. This step help
determines the stochastic nature of the four considered series and their
order of integration.
4.2.2. Step 2. ARDL cointegration test
The second step in the analysis focuses on testing long-run
relationship between variables (or cointegration). We used the auto-
regressive distributed lag approach proposed by Pesaran et al. (2001)
to examine cointegration. The advantages of such approach are:
• Can be applied irrespective of whether the explanatory variables are
I(0) or I(1).
• The procedure captures both short-run and long-run dynamics
when testing for the existence of cointegration.
• Offers explicit tests for existence of a unique cointegration vector
rather than assuming that it exists.
• When Johansen cointegration approach requires a large data
sample, bound testing is more suitable for small sample size data.
4.2.3. Step 3. Granger causality test
Although finding a cointegration link between the variables in-
cluded in the model, the direction of causality is not identified. Thus, in
the third step, we use a vector error correction model (VECM) with an
error-term defined by the long-run cointegration vector found in the
second step to detect the direction and the nature of causality. In the
presence of cointegration between variables, the VECM model sepa-
rates the shrot-run and long-run relationship among the variables.
We perform the Granger causality tests based on error correction
model for the following specifications:
F. Bélaïd, M. Youssef Energy Policy 102 (2017) 277–287

Fig. 4. Trends of variables (before taking logarithm).

n n n
5. Results and discussion
ΔCO2t = α0 + ∑ α1k ΔCO2t −k + ∑ α2k ΔRECt −k + ∑ α3k ΔNRECt −k
k =1 k =1 k =1
n 5.1. Order of integration (ZA tests)
+ ∑ α1k ΔGDPt −k + λ1 ETCt −1 + μ1t .
k =1 (4a) In order to analyze the stochastic properties (unit roots and
n n n
stationarity) of the four series, the Zivot and Andrews unit root tests
ΔGDPt = ρ0 + ∑ ρ1k ΔGDPt −k + ∑ ρ2k ΔCO2t −k + ∑ ρ3k ΔNRECt −k have been performed. The results of the ZA tests are detailed in
k =1 k =1 k =1 Table 2. The variables CO2 emissions, real GDP per capita and total
n non-renewable electricity consumption have unit root at level with
+ ∑ ρ4k ΔRECt −k + λ2 ETCt −1 + μ2t . intercept and trend. The (one time) structural breaks are found in CO2
k =1 (4b)
emissions, real GDP per capita, total non-renewable electricity con-
n n n sumption in 1996, 1990 and 1993 respectively.
ΔNRECt = γ0 + ∑ γ1k ΔNRECt −k + ∑ γ2k ΔCO2t −k + ∑ γ3k ΔRECt −k Results show the stationarity of REC and the non-stationarity of
k =1 k =1 k =1 CO2, GDP, NREC at level. But all the variables are found to be
n
stationary at first difference. Then the integration of CO2, GDP,
+ ∑ γ4k ΔGDPt −k + λ3 ETCt −1 + μ3t .
NREC and REC is of order 1, i.e. I(1). The unique order of integration
k =1 (4c)
of these variables leads us to test the existence of cointegration between
n n n them. In doing so, we performed the ARDL cointegration tests in the
ΔRECt = θ0 + ∑ θ1k ΔRECt −k + ∑ θ2k ΔCO2t −k + ∑ θ3k ΔNRECt −k presence of structural breaks. The null hypothesis concerning the
k =1 k =1 k =1 presence of a unit root process with drift excluding exogenous
n
structural change is not rejected for level series except for REC but is
+ ∑ θ4k ΔGDPt −k + λ 4 ETCt −1 + μ4t .
k =1 (4d) rejected for the first difference series.

Where Δ is the-first difference operator, k is the lag length based on

likelihood ratio test. For i=1,2,3,4, μit, represent the serially uncorre-
lated random error terms with a zero mean. For i=1,2,3,4, λi, denote
the adjustment coefficients, they show speed of adjustment toward the
equilibrium path of any deviations from the long-run cointegration
relationship (Bastola and Sapkota, 2015). Finally, the ECTt−1 repre-
sents the cointegration vector.
5.2. ARDL cointegration test
Table 3 illustrates the results for cointegration using the ARDL
bounds testing approach. The computed F-statistics of 3.2847 is higher
than the upper bound critical value at the 1% significance when CO2 is
used as dependent variable. However when the GDP and NELC are the

Fig. 5. Model steps.

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F. Bélaïd, M. Youssef Energy Policy 102 (2017) 277–287

Table 2 Table 5
Zivot and Andrews structural break unit root tests. Short-run analysis.

Variable At level At 1st difference Dependent variable = ΔCO2

Coefficient Std. Error t-Statistic Prob.
t-statistic Break year t-statistic Break year
Constant 0.0025 0.0066 0.3795 0.7075
CO2 −2.7435 (0) 1996 −10.9152 (0)* 2005 Δ (NRECt ) 0.3887 0.2023 1.9210 0.0662
GDP −2.8107 (1) 1990 −4.6082 (0)* 1995 Δ (CO2t−1) 0.0483 0.1521 0.3179 0.7532
NREC −4.1585 (0) 1993 −6.5274 (0)* 1989 Δ (GDPt ) −0.5427 0.4346 −1.2488 0.2233
REC −5.5037 (0)* 2003 −5.7825 (4)* 2003 Δ (RECt ) 0.0169 0.0145 1.1639 0.2554
ECT(CO2t−1) −0.3433 0.1378 −2.4902 0.0198
The 5% critical value of the test is −4.93 and the 1% one is −5.34. Lag order is shown in
parenthesis. R-squared 0.2865 Mean dependent 0.0125
*
means that the statistic is significant at 1% level. var
Adjusted R-squared 0.1438 S.D. dependent 0.0234
var
Table 3
Results of ARDL cointegration test.

Estimated models Bounds testing to coinegration 5.3. Parameter stability

Optimal lag length Break year F-statistics Unstable parameters can bias the results in the model misconcep-
tion, then our goal here is to test the estimated long-run parameters in
F(CO2 | GDP, NREC, REC) 2 1996 3.2847*
F(GDP | CO2, NREC, REC) 1 1990 1.2211 order to study their change over time. Therefore. we perform a Pesaran
F(NREC | CO2, GDP, REC) 1 1993 1.3523 and Pesaran (1997) test for testing the long-run parameter stability in
F(REC | CO2, GDP, NREC) 1 2003 2.8412 the cointegrating equation, where CO2 emissions is the dependent
variable. This test requires estimating the error correction model given
Significance level Critical values by Eq. (4a) by ordinary least squares and the residuals by the
cumulative sum of recursive residuals COSUM and the COSUM of
Lower bounds I (0) Upper bounds I (1)
square COSUMsq tests. Figs. 6 and 7 show the results of COSUM and
1% level 2.2000 3.0900 COSUMsq stability tests. The vertical axe, the horizontal axe and the
5% level 2.5600 3.4900 red dotted lines of the COSUM respectively represent year, COSUM
10% level 3.2900 4.3700 statistics and the 5% critical bounds for the statistics. The results of
*
COSUM and COSUMsq tests show the stability of the ARDL para-
significant at 1% level.
meters. In fact, both diagrams are situated inside the critical bounds.
dependent variables, the computed F-statistics, which are respectively
given by 1.2211 and 1.3523, are smaller than the lower critical value at 5.4. Granger causality test
the 1% level.
These results suggest the existence of a unique cointegration In order to examine the sources and the direction of causality and to
equation (given by Eq. (4a)) when CO2 emissions represent the distinguish between a long-run and a short-run relationship among
dependent variable. variables, we used a vector error correction models VECM. Three tests
The next step requires the examination of long-run marginal impact were performed. First, we applied the joint F-test to test the signifi-
of economic growth, renewable electricity consumption and non- cance of the sum of lagged terms of each explanatory variable (short-
renewable electricity consumption on CO2 emissions. The long-run run causality). Second, we applied a t-test to examine the significance
results detailed in Table 4 reveal that the impact of real GDP on CO2 of the error-correction terms (long-run causality). Third, we employed
emissions is negative and statistically insignificant. Besides, we find a joint F-test to examine the joint significance of the sum of lagged
positive impacts of renewable electricity and non-renewable electricity terms of each explanatory variable (the two sources of causation) and
consumption on CO2 emissions but such impacts are statistically the error correction term (short-run adjustment to reestablish long-run
insignificant. Notably, the effect of renewable electricity consumption equilibrium).
on CO2 emissions is very weak compared to the effect of non-renewable Table 6 provides the results of the tests on Granger causality
electricity consumption. derived from the vector error correction models for both short-run and
The short-run results are reported in Table 5. We find that the long-run and summarizes results on their respective direction of
impacts of renewable electricity and non-renewable electricity con-
sumption on CO2 emissions are positive but statistically insignificant.
Furthermore, real GDP have a negative effect on CO2 emissions but is
statistically insignificant.

Table 4
Long-run analysis.

Dependent variable = ΔCO2

Coefficient Std. Error t-Statistic Prob.

Constant 1.9659 0.7283 2.6991 0.0115

GDP −0.1211 0.2183 −0.5545 0.5835
NREC 0.3374 0.0400 8.4371 0.0000
REC 0.0496 0.0290 1.7050 0.0989

R-squared 0.8045
Adjusted R-squared 0.7843
Fig. 6. Plot of cumulative sum of recursive.

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F. Bélaïd, M. Youssef Energy Policy 102 (2017) 277–287

consumption Granger-cause CO2 emissions. Our finding differs from

Fig. 7. Plot of cumulative sum of squares of recursive residuals.
causality (for both short-run and long-run).
According to Table 6, there is evidence of a unique unidirectional
short-run Granger causality running from real GDP to non-renewable
electricity consumption. This short-run finding confirms the conserva-
tion hypothesis, implying that energy conservation policies intended to
diminish non-renewable electricity consumption will not have a
negative effect on economic growth.
Our result differs from the bidirectional causality found by Bélaïd
and Abderrahmani (2013) between GDP and non-renewable electricity
consumption, supporting the feedback hypothesis, in Algeria. Our
result is not in line with Marques et al. (2016) in France, who found
evidence of the feedback hypothesis. Our finding differs also from the
following former studies realized for multi-countries, who examined
the two types of energy and confirm the feedback hypothesis, like Salim
et al. (2014) for OECD countries, Apergis and Tang (2013) for 85
developed and developing countries, Apergis and Payne (2012) for six
central American countries, and Apergis and Payne (2011) for 16
emerging economies.
Turning to the long-run, Table 6 shows that the estimated
coefficient on lagged error correction term in Eq. (4a) is significant at
1% level and have expected negative sign. This implies the existence of
long-run unidirectional causality running from the variables; renew-
able electricity consumption, non-renewable electricity consumption
and real GDP to the variable CO2 emissions. The error correction
coefficient of −0.34 is the speed of adjustment, indicating that 34% of
deviations in the long-run relationships, for the CO2 emissions in Eq.
(4a), are corrected in the current period to bring the system back to the
equilibrium.
Our results reveal that in the long-run, renewable electricity
that of Menyah and Wolde-Rufael (2010) who found a unidirectional
causality running from CO2 emissions to renewable energy consump-
tion for the USA. They argue that renewable electricity consumption
has not reached a level where it can make a significant contribution to
decrease CO2 emissions (Menyah and Wolde-Rufael, 2010).
A long-run unidirectional causality running from non-renewable
electricity consumption to CO2 emissions is in line with Menyah and
Wolde-Rufael (2010) who considered nuclear energy consumption
instead of non-renewable electricity consumption. It is also consistent
with the finding of Bastola and Sapkota (2015) in Nepal, who analyzed
the relationships among energy consumption, CO2 emissions and
economic growth. But our finding differs from the bidirectional
causality between non-renewable energy consumption and CO2 emis-
sions found by Shafiei and Salim (2014) for OECD countries.
The result indicating that economic growth Granger-cause CO2
emissions in the long-run, implies real GDP have positive and
significant effects on CO2 emissions in Algeria. It is in line with
Shafiei and Salim (2014) for OECD countries. But it differs from that
of Menyah and Wolde-Rufael (2010) for the USA who found a
bidirectional causality between the series. The result of the long-run
causal relationship between real GDP and CO2 emissions is similar to
the finding of Shahbaz et al. (2014) who examined the causal relation-
ship between electricity consumption, real GDP and CO2 emissions in
the case of UAE. It is also similar to Bastola and Sapkota (2015) in
Nepal. However, this result differs from that of Menyah and Wolde-
Rufael (2010) who find a bidirectional causality between CO2 emissions
and real GDP in the US.
Finally, Table 7 summarizes results of the Granger causality derived
from the vector error correction models for the Joint (short-run/long-
run) and its respective direction of causality. According to Table 7, the
joint F-test indicates that the null hypothesis that the coefficients on
the ECTs and the interaction terms are jointly zero is rejected in REC
equation given by (4d). The results of this test confirm the presence of a
unidirectional Granger causality running from the variables; CO2
emissions and real GDP to the variable renewable electricity consump-
tion. We also found a unidirectional causality running from real GDP to
CO2 emissions.
Notwithstanding, results interpretation requires due caution be-
cause of the lack of consensus on the results and the direction of
causality which may be assigned to the particularity of the country's
economic policy, diversity of energy resources, the variables used at
different times and the methodological approach applied to test
causality.

Table 6
Results of the VECM Granger causality test and direction of causality (Short-run and Long-run).

Dependent Sources of causation (independent variables) Direction of causality

variable
Short-run (SR) Long-run (LR)

ΔCO2 ΔGDP ΔNREC ΔREC ECT SR LR

(4a) ΔCO2 – −0.54 0.39 −0.02 −0.34 *

GDP → NREC NREC → CO2
[−1.25] [−1.92] [−1.16] [−2.49] REC → CO2

(4b) ΔGDP −0.03 – −0.14 −0.01 −0.08 GDP → CO2

[−0.34] – [−1.74] [−0.05] [−1.14]

(4c) ΔNREC 0.31 −0.83* – −0.004 −0.09

[−1.91] [−2.19] – [−0.34] [−1.78]

(4d) ΔREC 2.88 1.89 −0.31 – −0.97

[−1.48] [−0.44] [−0.14] [−3.15]

*
Denotes significance at the 1% level.

285
F. Bélaïd, M. Youssef
Table 7
Results of the VECM Granger causality test and direction of causality - Joint (short-run/long-run).
Dependent Sources of causation (independent variables)
variable
Joint (short-run/long-run)
ΔCO2 , ECT ΔGDP, ECT
(4a) ΔCO2 – 3.12 *
(4b) ΔGDP −0.65 – 1.89
(4c) ΔNREC 2.77 2.87
(4d) ΔREC 5.22* 6.63*
*
Denotes significance at the 1% level.
6. Conclusion and policy implications
This paper attempts to explore the dynamic relationship between
CO2 emissions, economic growth, renewable and non-renewable elec-
tricity consumption in Algeria during the period 1980–2012. In view of
this goal, we considered an econometric model based on unit root test
(ZA tests), ARDL bounds testing cointegration approach, and VECM
Granger causality to examine the existence and direction of possible
causal relationship between the series. Besides the importance of
informing the policy debate, this paper seeks to add knowledge to
previous research in the area by providing a more comprehensive
overview on all aspects of the causal link between renewable and non-
renewable electricity consumption, CO2 emissions, and economic
growth in Algeria. We find a variety of causal relationship between
the series. Our results reveal that CO2 emissions in Algeria are
dependent on renewable electricity consumption, non-renewable elec-
tricity consumption and economic growth.
The long-run unidirectional Granger causality running from real
GDP to CO2 emissions, but not vice versa, implies that diminishing CO2
emissions means diminishing economic growth. Another important
result is that renewable and non-renewable electricity consumption
Granger cause the CO2 emissions in the long-run, but the inverse is not
true in Algeria. This means that an increase in electricity consumption
brings about an increase in CO2 emissions. Hence, it is an appropriate
way to decrease CO2 emissions by reducing renewable electricity
consumption in Algeria. The empirical results of this study seem to
provide important policy implications for Algeria.
The study provides ideas on the design and the implementation of
future economic, environmental and energy policies in Algeria, such as
developing strategic plans to reduce carbon emissions to protect the
environment for future generations. In addition, this analysis could be
useful for identifying the most effective measures for energy efficiency
programs and for helping policy makers to better understand the
relationship between the variables used in this study.
Actually falling oil prices, have raised many questions about
Algeria's economic model and its vulnerability to changes in oil prices.
Renewable electricity has emerged as an important alternative of
energy source and offers a variety of opportunities to reduce green-
house gas emissions associated with electricity generation, transmis-
sion, and distribution. The huge potential of renewable energy sources
in Algeria might provide huge benefits in terms of energy security,
replacing carbon-intensive energy sources, providing affordable elec-
tricity, stabilizing energy prices, economic growth and green job
creation. Investment in renewable energy projects can contribute to
reducing unemployment, which actually stands at 11.2%.
Currently Algeria is seeking to make its economy more sustainable
and to develop a green economy in the next decade and displace gas for
domestic power generation. The potential scope for renewable energy
deployment in Algeria is huge. Algeria is one of the largest potential
markets for renewable energy across the MENA region. Algeria is
targeting sufficient renewable energy to account for 40% of its energy
286
Energy Policy 102 (2017) 277–287
Direction of causality
ΔNREC , ECT ΔREC , ECT
4.13 *
3.21 CO2 → REC
2.12 GDP → REC
– 1.67 GDP → CO2
5.27* –
generation mix by 2030, whereas Morocco is targeting to generate 42%
of total energy from renewable sources by 2020. In the medium and
long term, it can be opined that Algeria could pursue the effort to
stimulate and oversee development of the countrys renewable energy
sector such as wind and power solar.
Finally, it is important to stress that Algeria needs to accelerate
promotion of renewable energy generation to meet rapidly domestic
growing energy demand and to preserve as much of its domestic oil for
export as possible. Actually Algeria generates about 93% of its
electricity from natural gas. In 2014, gas injection accounts for nearly
43% of enhanced oil recovery production (EIA, 2016). Renewable
energy purchasing might offers the country electricity at a stable price,
promises a significant energy conservation potential, and enables
natural gas and oil reserves to be freed up for export market.
Nevertheless, there is a need of reforms and strengthen the renewable
energy legal and regulatory framework to stimulate private entrepre-
neurs participation in developing energy sectors, provide favorable
financial and fiscal incentives for renewable investors and developers,
more active partnership at the regional level and more freedom of
action for national companies, especially in view of growing demand of
electricity. Algeria should also be aware of the key barriers to the
development of renewable energy and adopt an innovative approach to
tackle these barriers including: adequate harmonized legal and reg-
ulatory framework; extensive use of electricity subsidies, representing
the cornerstone of social-contract in Algeria; projects financing and
investment mechanisms.
Algeria currently lags behind most other countries in the world and
in the MENA region like Morocco and Jordan in terms of renewable
energy deployment. The projections for growth in demand for energy,
and especially electricity, in the MENA countries until 2020 are very
high. Otherwise, the electricity generation mix in the region is mainly
based on fossil fuels particularly natural gas. In this context, expanding
renewable energy sources energy is a cornerstone of the MENA
countries' efforts to address energy security of supply, environment
quality, and climate change issues. It is more than urgent to promote
deeper regional energy cooperation and developing concrete strategies
to exploit the strong levels of complementarity and interdependence
between the different MENA countries by taking into account the
peculiarities of each country in the region. The huge potential of
renewable energy sources in the MENA region might provide mutual
benefits in terms of energy security, replacing carbon-intensive energy
sources, enhancing environmental quality, providing affordable elec-
tricity, stabilizing energy prices, economic growth and job creation.
Due to its strategic geographical situation and its huge renewable
energy potential, Algeria is very likely to play a key role in future trans-
Mediterranean renewable electricity supply scheme.
Algeria should be at the forefront of the green growth efforts and
this can be supported by: using renewable energy sources rather than
fossil fuel to generate electricity, increasing efficiency of existing power
plants, reducing energy demand by increasing efficiency and conserva-
tion in dwellings, businesses, and industry sectors. This is an ambitious
F. Bélaïd, M. Youssef
vision, which will require intelligent solutions to complex technical
problems, including high-voltage interconnection, renewable energy
integration, smart grids and storage.
Finally, there are underlying deeper issues which require multiple
strategies and smart policies that encourage energy and economic
reforms in Algeria, such as electricity tariff reform, fuel substitution,
tax rebates, energy conservation, quota systems, premium payments,
auctions and cap and trade systems.
The main contribution of the paper is to empirically investigate the
inter-temporal links between the environment-renewable and non
renewable electricity-GDP nexus for Algeria. The findings of this
analysis may be unique to Algeria due to its specific institutional and
economic characteristics. And finally, the results above must be
interpreted with caution although the procedures used provide con-
sistent results for the most part.
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