The sensitivity of growth, conservation, feedback & neutrality hypotheses to sustainability accounting

The relationship between energy consumption and national economic welfare, as measured by gross domestic product, has been evaluated statistically in numerous studies. We summarize and compare the results of several of these studies for 15 emerging economies. Considerable differences between studies and between nations are found. Then, we introduce two measures of welfare based on the “Index of Sustainable Economic Welfare” (ISEW). The first measure, “BISEW” (hereafter BISEW), modifies GDP to emphasize equality, capital stock, and spending on private consumption, education, and medical care. The second measure, “Solid ISEW” (hereafter SISEW), subtracts carbon dioxide emissions and various measures of resource depletion to the BISEW, thus combining economic and environmental considerations in the measure of welfare. We apply Granger causality analysis with a seemingly unrelated regression (SUR) to evaluate how energy consumption correlates with GDP, BISEW, and SISEW for 15 emerging economies over the period 1995-2013. The results are expressed in terms of the directionality of Granger causality. Although there is consistency in many cases, the direction of causality is found to vary substantially between countries and depending on which of the three measures of welfare is evaluated.