Renewable and non-renewable energy consumption-growth nexus: Evidence from a panel error correction model

Unlike previous renewable energy consumption-growth studies, this study examines the relationship between renewable and non-renewable energy consumption and economic growth for 80 countries within a multivariate panel framework over the period 1990-2007. The Pedroni (1999, 2004) heterogeneous panel cointegration test show a long-run equilibrium relationship between real GDP, renewable energy consumption, non-renewable energy consumption, real gross fixed capital formation, and the labor force with the respective coefficient estimates positive and statistically significant. There is little difference in the elasticity estimates with respect to renewable and non-renewable energy consumption. The results from the panel error correction model reveal bidirectional causality between renewable and non-renewable energy consumption and economic growth in both the short- and long-run. Also, there is bidirectional short-run causality between renewable and non-renewable energy consumption indicative of substitutability between the two energy sources.

Research highlights► 80 country panel study from 1990-2007 on the renewable and non-renewable energy consumption-growth relationship. ► Renewable and non-renewable energy consumption each has a positive impact on real GDP in the long run. ► Bidirectional causality between renewable and non-renewable energy consumption and economic growth.