Renewable and non-renewable energy consumption and economic growth relationship revisited: Evidence from G7 countries

The aim of this study is to investigate the long-run and causal relationships between renewable and non-renewable energy consumption and economic growth by using classical and augmented production functions, and making a comparison between renewable and non-renewable energy sources in order to determine which type of energy consumption is more important for economic growth in G7 countries for 1980-2009 period. Autoregressive Distributed Lag approach to cointegration was employed for this purpose. Also, causality among energy consumption and economic growth was investigated by employing a recently developed causality test by Hatemi-J (2012). The long-run estimates showed that either renewable or non-renewable energy consumption matters for economic growth and augmented production function is more effective on explaining the considered relationship. On the other hand, although bidirectional causality is found for all countries in case of classical production function, mixed results are found for each country when the production function is augmented.

► Causality between renewable and non-renewable energy consumption and growth is examined. ► Autoregressive Distributed Lag approach to cointegration was employed. ► Causality was investigated by employing a causality test of Hatemi-J. ► Bidirectional causality is found for all countries in case of classical production function. ► Mixed results are found for each country when augmented production function is estimated.