Ecological Economy (2008)4:15-23
Empirical Study
Renewable energy – the path to sustainability
Xiaomei Tan 1 *, Brett Rose 2
1. 2400 41st Street, NW. Unit 312, Washington, DC 20007, USA
2. Environmental Systems Research Institute, 8615 Westwood Center Drive, Vienna, VA 22182, USA
Abstract: This article seeks to address some lingering debates within sustainability studies by revealing the connections between renewable energy consumption and sustainability. Using data from 30 OECD countries, the article
examines the connections via regression and geospatial analysis. Findings from the quantitative analysis indicate
that about 50% of the variation in sustainability is accounted for by the degree of renewables consumption. The geospatial analysis visually illustrates the intimate connections between the two variables. Theoretically, renewable energy relates to sustainability in three dimensions. The first dimension is economic. Relying on traditional fossil fuels
eventually will bring our economy to a stop. Renewable energies, however, are able to secure our energy supply into
an indefinite future. The second dimension links to ethics. To leave an intact planet to future generations is a moral
responsibility of our generation. The current energy supply system is built on depletion of natural resources, while
the sources of renewable energy are vast and constantly replenished. The last dimension is ecologic. How to allocate
a proper apportionment of the global biosphere between humankind and the other life on the earth is a critical issue
related to sustainability. By using renewable energy, we can greatly reduce our impact on biodiversity and therefore
strike a balance between humankind and other life. Overall the research suggests that developing renewables can
and in many cases does sustain a nation’s economic growth while simultaneously protecting the environment. It is a
win-win situation. This finding undoubtedly points out a practical and realistic path for sustainable development.
Keywords: Sustainability; Renewable energy; Environmental Sustainability Index; Governments
1. Introduction
God forbid that India should ever take to
industrialism after the manner of the West –
it took Britain half the resources of the planet
to achieve this prosperity. How many planets
will a country like India require? (Mahatma
Gandhi, Young India).
This question asked by Gandhi summarized the
collection of worries that haunts the debate over
sustainability to these days. Is there an unavoidable
trade-off between environmental degradation and
economic growth? Do Gandhi’s countrymen and
people in other developing countries have to make
a choice between grinding poverty and degraded
environment? What is the solution? This paper seeks
to address these issues by revealing the connections
Received June 13, 2007; Accepted Sept. 24, 2007
* Corresponding author. E-mail address: txmrose@gmail.com
Xiaomei Tan (1968- ), Female, PhD, Independent Research &
Consultant, specialized in environmental governance, energy
transition and sustainable development.
between renewable energy consumption and sustainability. Using data from 30 OECD countries, the
article demonstrates that sustainable development is
achievable through enlarging the share of renewables
in energy supply.
High gasoline and natural gas prices have kindled
governments’ and businesses’ interest in renewable
energy in recent years. Simultaneously, in the academic world scholars [1-5] with diverse background
have examined the advantages or limits of renewables. Primarily, the scholars approached the issue
from three perspectives: economy, environment and
national security. For economists, the key question related to renewable energy is quantitative – how much
renewables do we need to replace other supplies
and if this is economic. Environmentalists, however,
mainly highlight the beneficial impacts of renewables
on the environment. The concern over global warming has lent much momentum to renewable energy
advocates. Thanks to celebrity endorsement, renewable energy has gone from being marginal to core
in the US in recent years. From the view point of
national security, dependence on imported energy can
undermine a country’s security and increase the risk
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Tan X., Rose B. / Ecological Economy (2008)4:15-23
of military conflict in political hotspots around the
world [6-7]. The war in Iraq is pushing energy security
issues into the center of international policy agenda.
From their diverse perspectives, the scholars have
given numerous definitions to renewable energy. This
article follows what the International Energy Agency
(IEA) sets down:
“Renewable Energy is derived from natural processes that are replenished constantly.
In its various forms, it derives directly or indirectly from the sun, or from heat generated
deep within the earth. Included in the definition is energy generated from solar, wind,
biomass, geothermal, hydropower and ocean
resources, and biofuels and hydrogen derived
from renewable resources.” [8]
These primary sources of energy can be transformed into heat, electricity, and mechanical energy
in various forms. The technologies for conversion
of hydropower, biomass and waste combustion are
already mature. But other conversion technologies,
such as wind turbines and photovoltaic still have not
reached the expected level of efficiency and market
penetration. Although geothermal energy is generated
from geological instead of solar sources, it is often
considered as a source of renewable energy. Nuclear
power, however, is not included in renewable energy
list.
While much has been discussed regarding renewable energy’s pros and cons, little has been done
concerning a key issue – how much is renewable
energy related to sustainability. If sustainability is the
ultimate goal of our social, political and economic
policy, then finding out the connections between renewable energy and sustainability is crucial. It can
provide rationales for renewable energy investments
and development. The aim of this article is to uncover
the linkage between sustainability and renewable energy share in a nation’s total primary energy supply.
The article is organized as follows. Section 2 illustrates the data and the methodology. We use both
quantitative and geospatial methods to uncover the
relationship. The purpose of using two methods is to
investigate if the results drawn from them are consistent. Consistent results will make the conclusions
more convincing and thus increase the credibility of
the article. In section 3, we present calculations and
maps of the connections between sustainability and
16
renewables consumption. The calculations and maps
indicate strong correlation between the two variables.
In section 4, some academic conclusions and policy
recommendations are offered.
2. Methods
The complex meaning of sustainability has made
it difficult to give a comprehensive assessment of
each nation’s state of sustainable development. For a
long time, this difficulty had hampered a comparative
and reliable environmental analysis in most countries.
Therefore, in the past decade, many efforts have been
devoted to measuring sustainability levels in different
nations. Several indexes have been built and one of
them is widely recognized, namely “2005 Environmental Sustainability Index” (ESI).
The 2005 ESI is initiated by the Global Leaders of Tomorrow Environment Task Force of the
World Economic Forum. Columbia University and
Yale University contributed to the development of
this index. The ESI score measures ‘the likelihood
that a country will be able to preserve valuable environmental resources effectively over the period of
several decades’ on a scale of 1-100 [9]. The higher a
country’s ESI score, the better situated it is to maintain favorable environmental conditions into the future. In 2005, Finland topped all the countries with an
ESI score of 75.1; North Korea was at the bottom of
the list with a score of 29.2.
The ESI incorporates 5 core components: (1)
the state of the environmental system, including air,
water, soil and biodiversity; (2) the stresses on the
system; (3) human’s vulnerability to environmental
change; (4) social and institutional ability to deal
with environmental changes; and (5) the capacity and
willingness to cooperate with international society.
These 5 parts are quantified through 21 “indicators,”
each of which combines 2 to 12 data sets for a total
of 76 basic variables.
The method of aggregating data is oriented to the
goal of making them comparable among 146 countries. First, the selected variables are denominated by
factors such as per capita GDP and total population.
Then, the researchers trim the extreme values by
lowering any value greater than the 97.5 percentile to
the 97.5 percentile and raising any value lower than
the 2.5 percentile to the 2.5 percentile. Afterwards,
Tan X., Rose B. / Ecological Economy (2008)4:15-23
Table 1
Descriptive statistics of the data
Variable
N
Standard deviation
Mean
Min
Max
Environmental Sustainability Index
2005
146
8.5
49.9 (Thailand)
29.2 (North Korea)
75.1 (Finland)
Contribution of renewables to total
primary energy supply (%) 2005
30
15.4
12.5 (Portugal)
0.5 (South Korea)
74.1 (Iceland)
all the variables are converted to z-score. By averaging the z-score for each variable in the indicator and
weighting them equally, each indicator is calculated.
Using the same method, the value of each component
is derived. Finally, the index value is obtained by
averaging the values of five components and they are
weighted equally as well.
The renewables consumption data is from the
IEA. Thirty OECD countries are covered. The data
reports the percent contribution of renewable energy sources to total primary energy supply in these
countries. In 2005 Iceland topped the list with 74.1%
of energy supply coming from renewables; South
Korea was at the bottom with only 0.5% renewables
consumption. The descriptive statistics of the data is
presented in Table 1.
The method of the paper involves regression analysis and geospatial approach. Quantitative analysis
is good at generating broad and theoretically relevant
knowledge. By using regression analysis we can theorize the linkages between renewables consumption
and sustainability and therefore draw a general view
of the connections between these two variables. We
estimate:
Y = α + βX + ε
Where: Y is a measure of ESI 2005 score; X is
the share of renewable energy in total primary energy
supply; ε is an error term.
The ordinary least squares estimates of α and β
are listed in Table 2. The analysis of the results is
provided in the next section.
The other method is geospatial analysis. Geospatial analysis allows us to visualize the relationship
between the two variables and therefore produce a
direct and unambiguous picture of current state of
sustainability and renewables consumption in the 30
countries. With information referenced accurately
by location we can pinpoint the problems and make
suitable decisions. Sustainability involves issues at
both local and global levels, and geospatial analysis
is able to unveil the information in both terms. This
feature helps governments benchmark their position
on the global scale. Consequently, policymakers can
identify gaps among nations, prioritize goals and
finally evaluate performance for more clarity and effectiveness. Theoretically, by including ESI values
and renewables consumption data in a same map, we
can visually uncover the connections between these
two factors. This will broaden and deepen our understanding of sustainability.
Table 2
Model summary (b)
Model
1
R
R Square
Adjusted
R Square
.503
.485
.709(a)
Std. Error of
the Estimate
6.532
a Predictors: (Constant), 2005e
b Dependent Variable: ESI 2005
3. Results and discussions
Coefficients (a)
Model
1
(Constant)
2005e
Unstandardized
Coefficients
Standardized
Coefficients
B
Beta
Std. Error
50.611
1.530
.420
.079
a Dependent Variable: ESI 2005
.709
t
Sig.
33.075
.000
5.325
.000
Fig. 1 shows the regression line
drawn through the scatter plot of the
30 data points, where ESI value is
presented on Y axis and the percentage of renewable energy consumption
on X axis. The slope of the regression
line is equal to 0.42, suggesting that a
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Tan X., Rose B. / Ecological Economy (2008)4:15-23
1% increase in a nation’s renewable energy consumption is associated with an expected increase in ESI
value of 0.42 (detailed data refers to Appendix A).
The value of R-square is 0.53. In statistical terms
this indicates about 50% of the variation in the ESI is
accounted for by renewables consumption. Countries
with a larger share of energy supply from renewables tend to score higher in the ESI. In other words,
a nation’s performance in sustainable development
is, well understood by looking at its percentage of
renewable consumption. This result suggests that
developing renewables can – and does – sustain a nation’s economic growth and at the same time protect
environment. It is a win-win situation.
Theoretically, renewable energy relates to sustainability in three dimensions. The first dimension is an
economic one. For a long time there has been a belief
that environmental degradation caused by economic
growth is unavoidable. Economists such as Daly [10]
and Myers [11], for example, argue that growth is not
sustainable under any circumstances. Their reasoning is twofold. On one hand, “the desire for growth is
the inevitable result of micro-economic decisions by
households and firms. The price system is unable to
induce the right incentives that result in an allocation
that is indeed sustainable” [12]. Consequently, growth
is bound to take place through the over-exploiting of
natural resources, which creates a scarcity of natural
resources in nature’s economy and the people’s survival economy [13]. The relationship between resources and capital is zero-sum: “nature shrinks as capital
R2 = 0.53
Fig. 1. Regression of ESI on renewables consumption
18
grows” [13].
On the other hand, governments are often lack of
ability to steer growth in a sustainable way [12]. For
example, governments may be restricted in making
environmentally friendly policy or implementing
them due to the pressure from some interest groups or
the desire to increase exports. “Thus, they may find
themselves in a prisoner’s dilemma in which they
compete with each other for mobile firms through
inefficiently lax environmental standards” [12].
An energy transition from fossil fuels to renewable energy, however, is able to turn around or at
least stop this tradeoff tendency. Renewable energy
has a much lower environmental impact than fossil
fuels. Most of the renewable energy sources such as
solar, wind and tide are carbon neutral, while carbon
emissions are the number one factor causing climate
change. One of the greatest challenges we human
beings face today is to stabilize the atmospheric CO2
concentration. If we continue our current speed of
CO 2 emissions, some serious global risks are unavoidable.
Reducing CO 2 emissions, and policies to deal
with it, is viewed as an energy problem [14]. Because
renewable energies combined with energy efficiency
improvements, are found to be sufficient to stabilize CO 2 concentration [15]. Calculations by some
researchers [15-17] indicate that current technologies
could reduce CO2 concentration to 75% of their 1985
levels if energy efficiency and renewables are both
pursued aggressively. This point of view is reflected
in the Intergovernmental Panel on Climate
Change (IPCC)’s report and the British government’s Stern Report.
In addition to its contributions to reducing green-house gases, renewable energies can
greatly diminish air, water, land and other forms
of pollution. Major air pollutants including carbon monoxide, nitrogen oxides, sulfur oxides
and hydrocarbons are produced by fossil fuel
combustion. The use of fossil fuels also generates particulates, including dust, soot, smoke and
other suspended matters. They are responsible
for various respiratory illnesses. Renewable energies, however, are not associated with any of
these pollutants. A joint study by scientists from
Netherland, Australia, China and India showed
that an increased use of renewable energy could
Tan X., Rose B. / Ecological Economy (2008)4:15-23
cut SO2 emission-control costs by 17-35% in China,
and by more than two thirds in India [18].
Production, transportation and use of fossil fuels
can also cause water pollution. Coal mining, for example, is blamed for contaminating nearby waters.
Because coal contains pyrite and as water washes
through mines, it forms a dilute acid and enters nearby rivers or streams. Oil shipment accidents, such as
oil spills often leave waterways and their surrounding
environment uninhabitable for some time. Conversely, renewables can greatly reduce water pollution,
thermal pollution, waste, noise and undesirable landuse effects.
The second dimension is related to ethics. The
key ethical issue regarding sustainability is: how to
strike a proper balance between the present generation and those generations which will come after us
[19,20]
. The Brundtland Report points out the importance of maintaining fairness between generations
and among nations:
Even the narrow notion of physical sustainability implies a concern for social equity
between generations, a concern that must
logically be extended to equity within each
generation – Our inability to promote the
common interest in sustainable development
is often a product of the relative neglect of
economic and social justice within and among
nations [21].
In its 1990 environment White paper, the British
government showed the same concern, “The ethical
imperative of stewardship – must be underlie all
environmental policies – we have a moral duty to
look after our planet and hand it on in good order to
future generations” [22]. The ethical concern is indeed
rooted in a fact that value added GDP is generated
by transforming natural resources into man-made
products. The more we produce; the more natural
resources we consume. Current OECD countries with
per capita GDP over $20,000 have already consumed
40% of the earth’s primary terrestrial productivity
[23]
. The remaining 60% will have to be shared by
our generation and the generations after us. This fact
highlights limits of the natural resources that we live
on.
The sources of renewable energy, however, are
vast and constantly replenished. Its production and
consumption won’t cause depletion of natural re-
sources. This is the only way that we can secure our
energy supply and in the mean time conserve nature.
For example, sunlight falling on the US landmass
delivers about 500 times as much energy as the US
consumes. The annual wind energy potential of just
three states, North Dakota, Montana, and Wyoming,
is equal to all of the electricity used in the US in 1990
[24]
. If given enough economic and institutional support, renewable energies would be able to balance our
generation’s needs and those of future generations.
The third dimension is ecologic. Biologically derived products and processes account for an estimated
40% of the global economy. Much of this production
is based on the cultivation of an increasingly narrow
range of species and genes, with many large-scale
production processes in agriculture and forestry dependent on eradicating local biodiversity and replacing it with mono-cultural production [25]. Suppose that
you believe that ecological diversity is an important
objective in its own right. Then economic activity
that threatens to reduce such diversity is intrinsically
undesirable [19]. How to allocate a proper apportionment of the global biosphere between humankind and
the other life on the earth therefore becomes a critical
issue related to sustainability.
The respect for biological diversity, largely, depends on a society’s perception of the status of human beings and other life forms. This implies that a
society with a material, anthropocentric worldview is
more likely to use nature destructively than a society
in which the earth and all life are perceived as sacred [26]. By using renewable energy, we can greatly
reduce our impact on biodiversity. Out of all the
renewable energy sources, hydropower has the biggest influence on ecosystems. However, compared to
traditional fossil fuels, this influence is minor.
These three dimensions have explained the intimate connections between renewable energy and sustainable development. Problems with the traditional
energy supply and use are related not only to global
warming, but also to such environmental and ethical concerns as air pollution, ozone depletion, forest
destruction, emission of radioactive substances and
erosion of biodiversity. To a large extent, these issues
could be solved if fossil fuels are replaced by renewable energy.
While the quantitative method points to an intimate connection between renewable energy con-
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Tan X., Rose B. / Ecological Economy (2008)4:15-23
sumption and sustainability, the following geospatial
analysis will provide us an unambiguous picture of
the connection. Fig. 2 presents the distribution of
both ESI scores and share of renewables in total energy supply in 30 OECD countries.
There is a significant amount of consistency between the two variables, implying that a larger share
of renewables in a nation’s total energy supply is
associated with better performance in sustainable
development. As indicated by the maps, Canada,
Austria and the Nordic countries occupy the top
quartiles in both categories. This suggests that these
countries have a large share of energy supply coming
from renewable energy, which entails their excellent
performance in sustainable development.
The Nordic countries are particularly rich with
renewable energy sources such as hydropower, wind
power, bio-fuels and geothermal power. For over
15 years, Iceland has topped the world in exploiting
these abundant sources of renewable energy. Nearly
all of |Iceland’s electricity and heating comes from
hydroelectric power and the geo-thermal water reserves. Now the country is moving toward the goal
of ending its dependence on fossil fuels completely.
To reach this goal, the country has heavily invested
in the development of fuel cell technology. By using
this technology, “electricity to power an engine can
be generated by hydrogen and oxygen, with vehicle
exhausts emitting only the most innocuous substance
imaginable – water.” [27] This technology will not
only end Iceland’s partial reliance on fossil fuels, but
also slash green-house gas emissions.
A large share of Canada’s renewable energy
comes from hydropower, thanks to the country’
s dense water system. In recent years, Canada has
quickly developed its technology of transforming
biomass into energy. Therefore the share of biomass
in renewable energy is enlarging. Unlike its topranked peers, who have abundant renewable energy
sources, Austria primarily relies on solar energy. The
Austrian government established a series of programs
to support the production and consumption of solar
energy. Programmes such as PhotovoltaicRebate Programme and Solar Hot Water Rebates help Australian
households install environmentally friendly hot water
technologies.
A number of other countries have consistent performance in both dimensions. For example, South
Korea and Belgium are at the bottom of the both lists.
The US, Greece, France and some other countries
Fig. 2. Distribution of renewables consumption and ESI values in OECD Nations
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Tan X., Rose B. / Ecological Economy (2008)4:15-23
have a median ranking in both categories. After more
than 25 years of federal support, renewable energy
in the US has achieved neither a high level of market penetration nor a growing market share among
other energy sources [28]. From 1998 through 2001, a
drought-driven decline in hydroelectric availability
resulted in a major drop in national renewable energy
use in the US. This number started to return to previous levels after 2002. About 6% of national energy
supply came from renewable energy in 2004. These
days worldwide emphasis on climate change, and
the competition from Western Europe and Japan in
clean-energy technologies, are pushing the Bush administration to take a more supportive role in the investment and development of renewable energy. The
FY 2007 budget request for the renewable energy
program increased 30.5%, compared to the FY 2006
appropriation. It is expected that the favorable policy
will boost renewable energy’s role in the US’s energy
supply.
Only three countries, Mexico, New Zealand and
Poland see their renewables consumption ranking
falls behind that of ESI, indicating sub-par performance given their level of renewables development.
This slight inconsistency suggests that renewable
energy share is not the only factor that explains a nation’s level of sustainable development. Other factors
such as legal regimes, economic conditions and regulatory quality are part of the equation as well.
4. Conclusions
This article has applied statistical and geospatial
methods to investigate the connections between renewables consumption and sustainable development.
The finding from both methods indicates that developing renewables can – and does – sustain a nation’
s economic growth while at the same time protects
the environment. In statistical terms, the share of
renewable energy accounts for 50% of the variation
in the ESI. The GIS produced maps further prove the
intimate relationship by cartographically illustrating
each country’s rankings in ESI and percent of renewables used in energy supply. As the head of UNEP
said, there are few signposts on the path to sustainable development more visible – and more inspiring
– than the rapid evolution of the modern renewable
energy industry [29].
However, challenges to the success of this path do
exist. The largest challenge comes from governments.
The role of governments is crucial: to stimulate technical progress, to speed up the technological learning processes, to overcome the barriers to renewable
energy penetration [30]. It was because of governments’ subsides and heavy investments in refineries
and internal combustion technologies in the first two
decades of the 20th century that oil became dominant
energy source. Today, we need a strong commitment
from governments again in order to achieve energy
transition.
There are three ways for governments to support
the development of renewable energy: subsidies,
quotas and taxes. Subsidies are most popular, because
“governments like handing out taxpayers’ money.
Taxpayers tend not to notice.” According to some
economists, government subsidies are a good way to
kick-start a new technology and get it to market. The
modern wind energy industry is a successful example
of what can be achieved when governments bring
together the right investment signals with adequate
support for research and development.
Quotas require that a certain percentage of energy
supply be produced from eligible renewable energy
sources. Many countries use the method to enlarge
renewable energy’s share in primary energy supply.
In the US, 19 states have enacted a quota for their
electricity supply. For example, California mandated
to increase the percentage of renewable retail sales
by at least 1% per year to reach at least 20% by end
of 2010; goal of 33% by end of 2020. The Clinton
Administration proposed a federal Renewable Energy
Portfolio Standards that would require all US electricity suppliers to obtain renewable energy credits
equal to 7.5% of sales from 2010 to 2015 [31]. The
proposal, however, was aborted in the congress.
Taxes are likely to be the best way to support the
development of renewable energy. Taxes can be used
both punitive and compensatory. On the punitive
side, a tax sets a price for the violators to pay. On the
compensatory side, a tax offers credits to companies
or consumers who produce or purchase renewable
energy. The primary benefit of taxes is not the distortion of market equilibrium, but overcoming market
failure. The Nordic countries have used various taxes
– pollution taxes, fuel taxes, value added taxes and
excise tax allowances - to put a sustainable energy
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Tan X., Rose B. / Ecological Economy (2008)4:15-23
policy in place. This policy results in a large share
of renewable energy in their energy system and consequently a high ranking on the ESI list. The experience of the Nordic countries illustrates the theme of
this paper: renewable energy is an effective way to
sustainable development.
Overall, the research sheds light on a lingering
question within sustainability research – is there
an unavoidable tradeoff between economic growth
and environmental protection. It would appear that
the environment can be protected while promoting
economic growth if renewable energy takes a larger
share of our energy supply. The understanding of the
connections allows us to organize our thoughts on the
“deeper” determinants of sustainability. It is difficult
to think of any question in public policy that is of
greater academic significance, or of greater relevance
to the substantial majority of the population in the
world.
Acknowledgements
We would like to give special acknowledgement
to the International Energy Agency and the Center
for International Earth Science Information Network
at Columbia University for generously providing us
and the community at large with data and other valuable information related to sustainability and energy
issues. Our thanks also go to the reviewer and editor
of the article, who provided extremely valuable comments and suggestions. Finally, we would like to give
our special thanks to the publisher of the journal for
their acknowledgement of sustainability as an important issue that should be in public debate.
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Appendix A: Raw data for Fig. 1
Korea
Contribution of
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Luxembourg
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