Determinants of Nuclear Energy Consumption in South Asia: Economic and Energy Security Issues

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1 International Journal of Energy Economic and Policy ISSN: available at http: International Journal of Energy Economic and Policy, 215, 5(3), Determinant of Nuclear Energy Conumption in South ia: Economic and Energy Security Iue Khalid Zaman* Department of Economic, Univerity of Sargodha, Canal Campu, Lahore, Pakitan. * BSTRCT The objective of the tudy i to examine the caual relationhip between: (i) Nuclear energy conumption (NEC) and economic determinant (i.e. labor force, gro fixed capital formation and gro dometic product per capita (GDPPC), and (ii) nuclear conumption and energy ecurity (ES) iue (i.e. technology infratructure [TIF], energy ource, condition of land, concern of ES and political tability in the context of South ia. The tudy bring an annual aggregate data for South ia from the period of 196 to 212. The autoregreive ditributed lag bound teting approach employed for invetigating the hort- and long-run relationhip between the variable, while modified verion of the Granger cauality ued for determining the caual relationhip among NEC, economic factor and ES iue. The reult how that there i a long-run relationhip between NEC, economic indicator and ES iue; however, the a priori expectation of the variable differ with the NEC. The reult of cauality tet validate the neutrality hypothei between, (i) NEC and labor force; (ii) NEC and condition of land; and (iii) nuclear energy and GDPPC. Further, the cauality tet validate the feedback hypothei between (i) Nuclear energy and TIF; and (ii) nuclear energy and energy ource in the region. The reult indicate the unidirectional cauality running from nuclear energy to gro capital formation but not vice vera. Similarly, ES Granger caue nuclear energy which indicate that ES ha a vital role to increae nuclear energy in the region. Keyword: Nuclear Energy Conumption, Economic Growth, Energy Security, South ia JEL Claification: C32, Q43 1. INTRODUCTION The ian energy trend are the mot viible global interet, with profound inference for the world economy and geopolitic (Hong and Lugg, 214). ian economie are highly reliant on imported oil and ga to fuel economic growth. However, the ecological challenge related to greenhoue ga (GHG) emiion, human precaution and riing energy cot affected ian government to ue the conventional hydrocarbon energy reource. In the interim, Ruia and the central ian tate have a momentou proportion of the World primary energy reource and are appearing for way to amplify uch export to enlarge and branch out into new market in ia and Europe (ISDP, 213). Nuclear power i one of the few viable ource of energy that i nearly free of GHG emiion. The importance of nuclear energy conumption (NEC) for climate mitigation ha been emerged during the unfortunate nuclear accident in Fukuhima, Japan in 211 (Kim et al., 214). Brown and Kaplow (214) conclude that the nuclear upport i a ignificant determinant of whether tate practice nuclear armament from the ret of the world. In the imilar line, Park and Ohm (214) examine the public perception of the Fukuhima accident in the South Korea. The tudy found intereting evidence which include the ditinguihed variation of public perception i.e., public feeling, apparent gain, confidence, intention to ue, acquaintance and rik between before and after the underground eruption. Stern (214) emphaized on the role of the energy cience and ocial reearch for integrating human-energy to formulate utainable policie for the developing countrie. Shafiei and Salim (214) invetigate the determinant of carbon dioxide emiion in OECD countrie, over a period of The reult reveal that there i a ignificant and poitive relationhip between nonrenewable energy and carbon emiion, wherea renewable energy conumption decreae carbon dioxide emiion in the region. Evan and Mangeldorf (214) preented the individual viewpoint on nuclear receptor and invetigated the integration and 822 International Journal of Energy Economic and Policy Vol 5 Iue 3 215

2 Zaman: Determinant of Nuclear Energy Conumption in South ia: Economic and Energy Security Iue coordination ignaling network. The tudy conclude that there i a need of multicellular life which aociated with the ligand and trancriptional mechanim for integrating ignaling network. Galvin (214) examine the change in energy effectivene and energy conumption in each of the 28 European Union countrie including Norway, for the year The reult how that in majority of the European Union countrie, the rebound reult are in the range of -5% but newer land how 1-552%. Meade and Ilam (214) examine the uage of renewable energy technologie (RET) in 14 European countrie in a multi-country growth curve framework. The reult confirm the neutrality hypothei between the price of foil fuel and change in the growth of RET uage over time. khmat et al. (214) focued on the hypothei related with the energy led environmental degradation in the elected SRC countrie, covering the period of The reult confirm the energy led environmental degradation hypothei in SRC countrie. Näén (214) examine the long-run relationhip between private conumption, energy conumption and GHG emiion from Swedih houehold between the year 1993 and 26. The reult how that the total private expenditure i the major factor of houehold energy ue and GHG emiion with expenditure elaticitie of.77 and.85 repectively. Siegrit et al. (214) conducted the urvey of 561 repondent of German and French peaking region of Switzerland regarding the pot affect of the Fukuhima accident. The reult how that the people profeed omewhat more hazard related to the nuclear power after the mifortune in Fukuhima. guilera (214) examine the market hare of gae, liquid and olid in the ia Pacific from 185 to 21. The ia Pacific i found to have enormou natural ga reource, though uitable policie are needed to develop the potential. Ozturk and Bilgili (215) examined the relationhip between bioma energy conumption and economic growth in the panel of Sub-Saharan frican countrie, over the period of The reult how that bioma energy conumption ha a ignificant impact on frican growth. In the imilar line, Bilgili and Ozturk (215) examined bioma energy conumption and economic growth in the panel of G-7 countrie and found that bioma energy have a poitive impact on G-7 countrie economic growth. Shahbaz et al. (215) invetigated the environmental Kuznet curve in the context of Portugal and confirmed the viibility of environmental Kuznet curve both in the hort- and long-run. Ia et al. (215) urveyed the caual relationhip between energy conumption and economic growth tudie and highlighted the importance of caual relationhip between the variable acro the countrie. In the light of above dicuion, the preent tudy examine the cauality relationhip between NEC, economic indicator and energy ecurity (ES) iue, by uing the aggregate data of South ia, during DT SOURCE ND METHODOLOGICL FRMEWORK The tudy i baed on annual data of NEC, gro dometic product per capita (GDPPC), total labor force (LR); gro fixed capital information (GFCF); technology infratructure (TIF); energy ource (ENRG); condition of land (LND); ES and political tability (PS) covering a time period from 196 to 212 in South ia. ggregate data i taken from World Bank (213) to avoid the individual countrie hock. NEC i expreed in term of percentage of total energy ue. The GDPPC i expreed in contant 2 US dollar, labor force in term of total labor force; GFCF in term of percentage of GDP; TIF in million US $; ENRG in US $ million; LND i in total arable land per hectare; ES in US $ million and PS i the dummy variable i.e. expreed PS while 1 expreed political intability in the region Econometric Framework The tudy adopted the following equential tep for evaluating nuclear energy iue both economic and ecurity concern in South ia i.e., Step 1: Unit root tet i ued for analyzing tationary propertie in the variable. Step 2: For analyzing long-run relationhip between the variable, the tudy ued Wald F-tatitic for upper bound critical value a uggeted by Pearan et al. (21) and Narayan (25). Step 3: To etimate hort-and long-run elaticitie by uing autoregreive ditributed lag (RDL) technique. Step 4: To examine the caual relationhip among the variable, the tudy employed Wald F-tatitic with impoing retriction in the multivariate framework. There are a number of poible rationale for uing the RDL econometric technique (ometime called bound teting approach uggeted by Pearan et al., 21) i.e., however, the two mot ignificant validation are: In unit root etimation, if there have a mixture of order of integration between the variable, then Johanen cointegration in multivariate framework may not uitable for further etimation. There would be the good jutification by uing RDL technique for thoe modeling, a it incorporate both zero and one order of integration in their framework There i not a ignificant requirement of large data et for etimation, a thi technique i uitable for mall or finite ample ize a well. The following equation ha been etimated in the unretricted error correction model (ECM) i.e., ln( NEC) = β + β ln( NEC) + β ln( GDPPC) t 1 t 1 2 t 1 + β ln( GCFC) + β ln( LF) + β ln( TIF) 3 t 1 4 t 1 5 t 1 + β ln( ENRG) + β ln( LND) + β ln( ES) 6 t 1 7 t 1 8 t 1 + β ( PS) + β ln( NEC) + β ln( GDPPC) p q r β12 + β13 + β15 ln( ENRG) + β16 ln( LND) β17 ln( ES) t i + β 18 PS + ut ln( GCFC) ln( LF) β ln( TIF) (1) International Journal of Energy Economic and Policy Vol 5 Iue

3 Zaman: Determinant of Nuclear Energy Conumption in South ia: Economic and Energy Security Iue Where Δ i the firt-difference operator and u t i a white-noie diturbance term. Equation (3) alo can be viewed a an RDL of order (p, q, r, ). Equation (3) indicate that NEC tend to be influenced and explained by it pat value. The Wald tet can be carry out by impoing retriction on the etimated long-run coefficient of NEC and it determinant. The null and alternative hypothee are a follow: H : β 1 = β 2 = β 3 = β 4 = β 5 = β 6 = β 7 = β 8 = β 9 = (no long-run relationhip) gaint the alternative hypothei H a : β 1 β 2 β 3 β 4 β 5 β 6 β 7 β 8 β 9 ( long-run relationhip exit) To etablih the cauality direction, we etimate the following vector ECM (VECM) i.e., ln 11i... 12i... 13i... NEC 14i t α 1 ln GDPPC t α 2 21i... 22i... 23i... 24i ln GFCF t α 3 31i... 32i... 33i... 34i ln LFt α 4 41 i... 42i... 43i... 44i lntif t = α i... ln ENRG t α 6 61i... ln LNDt α 7 ln ES t α 8 PSt α 9 91i... ln NEC δ ξ1t ln GDPPC γ ξ2t ln GFCF λ ξ 3t ln LFt i ϕ ξ4t lntif λ [ ECTt 1] ξ + + 5t ln ENRG π ξ6t ln LND ζ ξ 7t ln ES ψ ξ 8t PS ω ξ9t 54i 64i 71i... 74i 81i... 84i The reidual ξ1t, ξ2t, ξ3t and ξ 4t are tationary and pherical ditribution. ECT t 1 i the lagged error-correction term derived from the cointegrating equation. 3. RESULTS ND DISCUSSION The tudy employed augmented dickey-fuller (DF) unit root tet for examine the tationary propertie of the candidate variable. The reult are preented in Table 1. The reult confirmed the unit root problem, a NEC, economic factor and ES how non-tationary erie at level, however, taking firt difference, the variable become tationary. The reult 94i (2) conidered that the candidate variable having an order of integration one i.e. we aid I(1) variable. In next tep, the tudy ued Hendry general-to-pecific modeling approach with maximum lag order of three for the conditional RDL-VECM. Table 2 preented the reult of bound tet with Wald F-tatitic in RDL-ordinary leat quare regreion. The reult how that each model pecification in the table i ignificant at 1% level. Thu, the model contain long-run cointegration relationhip between the variable. The reult of Table 2 implie that both economic and ES variable are moving together with NEC in the long-run, though divergence may take place in the hort-run. dditionally, the exitence of cointegration mean that the explanatory variable are rightly conidered. Table 3 how the long-run coefficient derived from RDL model. Table 1: DF unit root tet Variable Level Firt difference Contant Contant Contant and trend NEC I () I (1) I (1) RGDPPC I () I (1) I (1) LR I () I (1) I (1) GFCF I () I (1) I (1) TIF I () I (1) I (1) ENRG I () I () I (1) LND I () I (1) I (1) ES I () I (1) I (1) I () indicate non tationary erie at level, while I (1) indicate after taking firt difference, the erie would become tationary. For thi purpoe, McKinnon (1996) critical value are ued for benchmark. Schwarz information criteria i elected for optimal lag length election which range from lag to lag 1, DF: ugmented dickey fuller, NEC: Nuclear energy conumption, LR: Labor force, GFCF: Gro fixed capital information, TIF: Technology infratructure, ES: Energy ecurity Table 2: Reult of bound tet Dependent variable Wald Outcome F tatitic F NEC (LNECILGDPPC, LGFCF, LLR, * Co integration LTIF, LENRG, LLND, LES) FG DPPC (LGDPPCILNEC, LGFCF, 93.51* Co integration LLR, LTIF, LENRG, LLND, LES) F GFCF (LGFCFILGDPPC, LNEC, 94.21* Co integration LLR, LTIF, LENRG, LLND, LES) F LR (LLRILGDPPC, LGFCF, LNEC, 6.97* Co integration LTIF, LENRG, LLND, LES) F TIF (TIFILGDPPC, LGFCF, LNEC, 14.28* Co integration LLR, LENRG, LLND, LES) F ENRG (LENRGILGDPPC, LGFCF, 16.96* Co integration LNEC, LLR, LTIF, LLND, LES) F LND (LLNDILGDPPC, LGFCF, 6.69* Co integration LNEC, LLR, LTIF, LENRG, LES) F ES (LESILGDPPC, LGFCF, LNEC, LLR, LTIF, LENRG, LLND) 27.25* Co integration Critical Pearan et al. (21) Narayan (25) value Lower bound Upper bound Lower bound Upper bound (%) value value value value *Significance at 1% level, NEC: Nuclear energy conumption, LR: Labor force, GFCF: Gro fixed capital information, TIF: Technology infratructure, ES: Energy ecurity 824 International Journal of Energy Economic and Policy Vol 5 Iue 3 215

4 Zaman: Determinant of Nuclear Energy Conumption in South ia: Economic and Energy Security Iue The reult indicate that in the long-run, both GDPPC and gro capital formation ha a ignificant relationhip with the NEC, a if there i 1% increae in GDPPC and gro capital formation, nuclear energy increae by.244% and.625% repectively. The reult imply that deployment of the nuclear plant increae the gro capital formation and the NEC. On the other hand, TIF, Table 3: The etimated long run elaticitie uing the DRL approach dependent variable: Ln (NEC) t Variable Coefficient t tatitic P Contant Ln (GDPPC) t Ln (GFCF) t Ln (LR) t Ln (TIF) t Ln (ENRG) t Ln (LND) t Ln (ES) t PS Model criteria/goodne of fit: R 2 =.625; djuted R 2 =.612; F tatitic=6.895 [.], Durbin-Waton=1.919, Diagnotic checking: Jarque Bera normality tet=1.425 [.62]; LM Breuch-Godfrey erial correlation=.988 [.383]; White heterocediticity=.463 [.887]; Ramey reet pecification error tet=.247 [.622]. In diagnotic checking, the probability value are in the quare bracket. GFCF: Gro fixed capital information, TIF: Technology infratructure, ES: Energy ecurity, NEC: Nuclear energy conumption, LR: Labor force, GFCF: Gro fixed capital information, GDPPC: Gro dometic product per capita, PS: Political tability Table 4: Etimated hort run elaticitie uing the DRL approach dependent variable: Ln (NEC)t Variable Coefficient t tatitic P Contant Ln (GDPPC) t Ln (GFCF) t Ln (LR) t Ln (TIF) t Ln (ENRG) t Ln (LND) t Ln (ES) t PS M (1) ECT t Model criteria/goodne of fit: R 2 =.668; djuted R 2 =.625, Diagnotic checking: JB=1.92 [.386]; LM 1=.752 [.48]; white heterocediticity=.994 [.492]; The ECT t 1 i the one period lagged error correction term. Probability value are quoted in quare bracket. GFCF: Gro fixed capital information, TIF: Technology infratructure, ES: Energy ecurity, ECT: Error correction model, PS: Political tability energy ource and PS ignificantly and poitively aociated with the NEC in South ia. The ignificance and poitive aociation of PS dummy indicated that along with increae PS, South ia emerged a a nuclear energy intenive region in the World. Table 4 how the hort-run dynamic coefficient managed from the ECM Equation (4). The reult in the hort-run reveal that explanatory variable i.e., GDPPC and LR are poitively related to NEC which i tatitically ignificant at 1%, 5% and 1% repectively. The hort-run effect of GDPPC and LR on NEC, contributing to about 1.85% and.17% in South ia. ES variable i.e., TIF, energy ource; ES and PS have a ignificant impact on nuclear energy, however, the magnitude varie with the NEC i.e. TIF ha one-to-one correponding relationhip with the nuclear energy, while there ha been le elatic relation with the energy ource and ES. PS how that there i negative relationhip with the NEC which how that along with increae in political intability nuclear energy decreae by.254%. The error correction coefficient (ECT) t-1, etimated at.252 i tatitically ignificant at 5%, thi how that about 25.2% of diequilibria from the previou year hock converge back to the long-run equilibrium in the Table 5: Short run cauality tet (Wald tet F tatitic) Variable Cauality Deciion direction NEC and GDPPC NEC and GDPPC hold neutrality hypothei NEC and GFCF NEC Granger caue GFCF i.e., unidirectional cauality between them NEC and LR NEC and LR hold neutrality hypothei NEC and TIF Feedback hypothei between the variable NEC and ENRG Feedback hypothei between the variable NEC and LND NEC and LND hold neutrality hypothei NEC and ES ES Granger caue NEC i.e., unidirectional cauality between them : Show bidirectional, : Unidirectional conervation hypothei, : Unidirectional growth hypothei, and : No cauality, NEC: Nuclear energy conumption, LR: Labor force, TIF: Technology infratructure, GDPPC: Gro dometic product per capita, RNRG: Energy ource Figure 1: Stability tatitic CUSUM 5% Significance CUSUM of Square 5% Significance International Journal of Energy Economic and Policy Vol 5 Iue

5 Zaman: Determinant of Nuclear Energy Conumption in South ia: Economic and Energy Security Iue current year. The value of R 2 and adjuted R 2, i.668 and.625 repectively. The tudy advance the tability tet by uing CUSUM and CUSUM of quare tet in Figure 1. Figure 1 indicate that the etimated parameter are table and ignificant at 5% level, over the ample period of The dynamic hort-run cauality preented in Table 5. The reult how that there i bidirectional cauality between NEC and TIF; and between NEC and energy ource in South ia. While, cauality running toward NEC to GFCF but not vice vera which implie that there i unidirectional cauality exit between them. ES Granger caue NEC but not vice vera, which implie energy ource caue NEC but not another route. Finally, there i no cauality between NEC and LR; NEC and GDPPC and NEC and LND which hold neutrality hypothei between them. Lecamwaam and Uyangoda (213) how their concern on South ian nuclear capabilitie and their ecurity iue. Economic growth and growing population have put South ia ES in a dangerou tate. Both energy and power hortage are exploiting development in ome of the region leat developed location driving political inurgence and ocial diruption (Brooking, 211). 4. CONCLUSION The objective of the tudy i to examine the role of economic variable and ecurity iue on NEC in the South ia, which are the ongoing debate in thi region. The reult reveal that both economic and ES iue played a vital role to analyze NEC in the region, however, the magnitude of influencing nuclear energy more pronounced ES iue rather than economic iue. The following concluion ha been emerged with thi exercie i.e., DF unit root tet confirmed the exitence of unit root problem in nuclear energy, ES iue and economic variable, thu there i a need to adopt utained economic and ES policie for averting wide variation in the data et of the candidate variable over a period of time The tudy evaluated eight different model and each model how the cointegration relationhip between the variable The hort-run elaticitie ugget that there i one-to-one correponding relationhip between (i) GDP and NEC and between, (ii) TIF and NEC in the South ia The total labor force, ES, PS, and energy ource have a le elatic relationhip with the NEC in the hort-run In the long-run, thee reult ha been evaporated in term of le magnitude and different ign, a GDP, gro capital formation, TIF, energy ource and PS have a le elatic relationhip with the NEC in the region The dummy variable of PS how the poitive aociation with the NEC which indicate that the South ia come forwarded a a nuclear intenive region in the world The reult of Granger cauality indicate the unidirectional, bidirectional and no caue-effect relationhip between the variable The tudy confirmed the feedback hypothei between two mot promiing ES variable in relation with the NEC i.e., TIF and energy ource in the South ia, while, ES Granger caue NEC but not viz. 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