Industrial Development and Renewable Electricity in Morocco: Asymmetric Adjustment and the Role of Water Resources

Abstract

Abstract

The interaction between renewable energy, water resources, and industrial activity has become increasingly relevant for economies undergoing structural transformation. This study examines whether changes in renewable electricity output and water abstraction have different effects on industrial value added in Morocco over the period 1990–2021. Gross domestic product (GDP) and agricultural activity are included as control variables. A Nonlinear Autoregressive Distributed Lag (NARDL) model is used to capture differences between positive and negative changes, complemented by an asymmetric Granger causality analysis. The empirical approach is motivated by the possibility that industrial adjustment to changes in energy supply may be costly and only partly reversible. The bounds test provides evidence of a long-run relationship among the variables. Positive changes in renewable electricity output increase industrial value added, with an estimated coefficient of 2.14. By contrast, negative changes have a considerably stronger adverse effect, with a coefficient of −3.87. This contrast points to a greater sensitivity of industrial activity to reductions in renewable electricity availability than to equivalent increases. Water abstraction shows no statistically significant effect on industrial value added, either in the long run or in the short run, suggesting that aggregate national withdrawals do not capture the specific water-related pressures faced by industrial activities. Agricultural activity and GDP are positively related to industrial value added in the long run. The asymmetric Granger causality test identifies a unidirectional predictive effect running from negative changes in renewable electricity output to industrial activity. The results indicate that interruptions in clean electricity supply may impose substantial costs on Morocco's industrial sector. Maintaining a reliable renewable electricity supply is thus relevant to industrial competitiveness and the country's transition towards a more sustainable production structure. Energy policy should be designed alongside industrial policy, with greater attention to supply reliability and the ability of firms to absorb energy-related disruptions.

Keywords: industrial activity; renewable electricity; water resources; Morocco; NARDL; Asymmetric Adjustment.