Impact of renewable energy consumption on economic growth: evidence from European Union countries
Abstract
This study examines the causal relationship between economic growth and renewable energy consumption using data for 28 countries of European Union, taken from Eurostat database for years from 1995 to 2015. In addition, motivated by EU Directive 2009/28/EC, the tendency of the share of renewable energy consumption into the final energy consumption is analysed. Various panel data techniques implemented in EViews are used. The empirical results suggest a positive impact of renewable energy consumption on economic growth, and emphasize bidirectional or unidirectional Granger causalities between the two macroeconomic indicators, for each country in the panel. These results justify the political decisions of EU concerning the necessity of increasing the renewable energy consumption, and prove that this type of energy consumption has a strong positive impact on economic growth. Thus, the inclusion of such policies in future EU and national strategies is further motivated. Finally, by means of linear regression, an increasing trend was found for the ratio between renewable energy consumption and final energy consumption for all but one of the EU countries.
Keyword : renewable energy consumption, final energy consumption, economic growth, panel countries, Granger causality, FMOLS
How to Cite
Soava, G., Mehedintu, A., Sterpu, M., & Raduteanu, M. (2018). Impact of renewable energy consumption on economic growth: evidence from European Union countries. Technological and Economic Development of Economy, 24(3), 914-932. https://doi.org/10.3846/tede.2018.1426
This work is licensed under a Creative Commons Attribution 4.0 International License.
References
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Apergis, N., & Payne, J. (2011b). The renewable energy consumption – growth nexus in Central America. Applied Energy, 88, 343-347. https://doi.org/10.1016/j.apenergy.2010.07.013
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Aslan, A. (2013). Energy consumption and GDP: The strong relationship in OECD countries. Journal Energy Sources, Part B: Economics, Planning, and Policy, 8(4), 339-345. https://doi.org/10.1080/15567240903502586
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Dalla Longa, F., & van der Zwaan, B. (2017). Do Kenya’s climate change mitigation ambitions necessitate large-scale renewable energy deployment and dedicated low-carbon energy policy?, Renewable Energy, 113, 1559-1568. https://doi.org/10.1016/j.renene.2017.06.026
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Engle, G., & Granger, C. (1987). Co-Integration and error correction: Representation, estimation, and testing. Econometrica, 55(2), 251-276. https://doi.org/10.2307/1913236
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Inglesi-Lotz, R. (2016). The impact of renewable energy consumption to economic growth: A panel data application. Energy Economics, 53, 58-63. https://doi.org/10.1016/j.eneco.2015.01.003
Jarque, C. M., & Bera, A. K. (1980). Efficient tests for normality, homoskedasticity and serial independence of regression residuals. Economics Letters, 6, 255-259. https://doi.org/10.1016/0165-1765(80)90024-5
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Lin, B., & Moubarak, M. (2014). Renewable energy consumption-Economic growth nexus for China. Renewable and Sustainable Energy Reviews, 40, 111-117. https://doi.org/10.1016/j.rser.2014.07.128
Mardani, A., Jusoh, A., Nor, K., Khalifah, Z., Zakwan, N., & Valipour, A. (2015). Multiple criteria decision-making techniques and their applications – a review of the literature from 2000 to 2014. Economic Research, 28(1), 516-571. https://doi.org/10.1080/1331677X.2015.1075139
Ocal, O., & Aslan, A. (2013). Renewable energy consumption-economic growth nexus in Turkey. Renewable and Sustainable Energy Reviews, 28, 494-499. https://doi.org/10.1016/j.rser.2013.08.036
Okyay, U., Ebru, A., & Fatih, Y. (2014). Energy consumption and economic growth nexus: Evidence from developed countries in Europe. International Journal of Energy Economics and Policy, 4(3), 411-419.
Ozturk, F. (2017). Energy consumption–GDP causality in MENA countries. Energy Sources, Part B: Economics, Planning, and Policy, 12(3), 231-236. https://doi.org/10.1080/15567249.2015.1072597
Pao, H. T., & Fu, H. C. (2013). Renewable energy, non-renewable energy and economic growth in Brazil. Renewable and Sustainable Energy Reviews, 25, 381-392. https://doi.org/10.1016/j.rser.2013.05.004
Pedroni, P. (2004). Panel cointegration: asymptotic and finite sample properties of pooled time series tests with an application to the PPP hypothesis: new results. Econ. Theory, 20, 597-627. https://doi.org/10.1017/S0266466604203073
Phillips, C. B., & Hansen, B. 1990. Statistical inference in instrumental variables regression with I (1) processes. Review of Economics Studies, 57, 99-125. https://doi.org/10.2307/2297545
Phillips, P. C., & Perron, P. (1988). Testing for a unit root in time series regression. Biometrika, 75, 335-346. https://doi.org/10.1093/biomet/75.2.335
Rafiq, S., & Salim, R. (2009). Temporal causality between energy consumption and income in six Asian emerging countries. Applied Economics Quarterly, 55(4), 1-16. https://doi.org/10.3790/aeq.55.4.335
Rafiq, S., & Salim, R. (2011). the linkage between energy consumption and income in six Asian emerging economies: An empirical analysis. International Journal of Emerging Market, 6(1), 50-73. https://doi.org/10.1108/17468801111104377
Sadorsky, P. (2009). Renewable energy consumption and income in emerging economies. Energy Policy, 37(10), 4021-4028. https://doi.org/10.1016/j.enpol.2009.05.003
Salim, R., & Bloch, H. (2009). Expenditures on business R&D and trade performance in Australia: Is there a link?. Applied Economics, 41, 351-361. https://doi.org/10.1080/00036840601007302
Stern, D. (2000). A multivariate cointegration analysis of the role of energy in the US economy. Energy Economics, 22, 267-283. https://doi.org/10.1016/S0140-9883(99)00028-6
Tugcu, C. T., Ozlturk, I., & Aslain, A. (2012). Renewable and non-renewable energy consumption and economic growth revisited: evidence from G7 countries. Energy Econ, 34, 1942-1950. https://doi.org/10.1016/j.eneco.2012.08.021
Wada, I. (2017). Energy production and economic growth in Saudi Arabia: Dynamic causality. Energy Sources, Part B: Economics, Planning and Policy, 12(6), 584-590. https://doi.org/10.1080/15567249.2016.1248872
Yildirim, E., Sarac, S., & Aslan, A. (2012). Energy consumption and economic growth in the USA: Evidence from renewable energy. Renewable and Sustainable Energy Review, 16(9), 6770-6774. https://doi.org/10.1016/j.rser.2012.09.004
Anwar, A., Arshed, N., & Nabeela Kousar, N. (2017). Renewable Energy Consumption and Economic Growth in Member of OIC Countries. European Online Journal of Natural and Social Sciences, 6(1), 111-129.
Apergis, N., & Danuletiu, D. (2014). Renewable energy and economic growth: Evidence from the sign of panel long-run causality. International Journal of Energy Economics and Policy, 4(4), 578-587.
Apergis, N., & Payne, J. (2010a). Renewable energy consumption and growth in Eurasia. Energy Economics, 32, 1392-1397. https://doi.org/10.1016/j.eneco.2010.06.001
Apergis, N., & Payne, J. (2010b). Renewable energy consumption and economic growth: Evidence from a panel of OECD countries. Energy Policy, 38(1), 656-660. https://doi.org/10.1016/j.enpol.2009.09.002
Apergis, N., & Payne, J. (2011a). Renewable and non-renewable energy consumption-growth nexus: Evidence from emerging market economics. Applied Energy, 88, 5226-5230. https://doi.org/10.1016/j.apenergy.2011.06.041
Apergis, N., & Payne, J. (2011b). The renewable energy consumption – growth nexus in Central America. Applied Energy, 88, 343-347. https://doi.org/10.1016/j.apenergy.2010.07.013
Apergis, N., & Payne, J. (2012). Renewable and non-renewable energy consumption-growth nexus: Evidence from a panel error correction model. Energy Economics, 34, 733-738. https://doi.org/10.1016/j.eneco.2011.04.007
Aslan, A. (2013). Energy consumption and GDP: The strong relationship in OECD countries. Journal Energy Sources, Part B: Economics, Planning, and Policy, 8(4), 339-345. https://doi.org/10.1080/15567240903502586
Bhattacharya, M., Paramati, S., Ozturk, I., & Bhattacharya, S. (2016). The effect of renewable energy consumption on economic growth: Evidence from top 38 countries. Applied Energy, 162, 733-741. https://doi.org/10.1016/j.apenergy.2015.10.104
Bloomberg New Energy Finance (BNEF). (2016). Global trends in renewable energy investment 2016. 84 p. Frankfurt School-UNEP Centre. Retrieved from http://fs-unep-centre.org/sites/default/files/publications/globaltrendsinrenewableenergyinvestment2016lowres_0.pdf
Bobinaite, V., Juozapaviciene, A., & Konstantinaviciute, I. (2011). Assessment of causality relationship between renewable energy consumption and economic growth in Lithuania. Engineering Economics, 22(5), 510-518. https://doi.org/10.5755/j01.ee.22.5.969
Bozkurt, C., & Destek, M. (2015). Renewable energy and sustainable development nexus in selected OECD countries. International Journal of Energy Economics and Policy, 5(2), 507-514.
Chontanawat, J., Hunt, L., & Pierse, R. (2008). Does energy consumption cause economic growth? Evidence from a systematic study of over 100 countries. Journal of Policy Modeling, 30, 209-220. https://doi.org/10.1016/j.jpolmod.2006.10.003
Dalla Longa, F., & van der Zwaan, B. (2017). Do Kenya’s climate change mitigation ambitions necessitate large-scale renewable energy deployment and dedicated low-carbon energy policy?, Renewable Energy, 113, 1559-1568. https://doi.org/10.1016/j.renene.2017.06.026
Dickey, D. A., & Fuller, W. A. (1981). Likelihood ratio statistics for autoregressive time series with a unit root. Econometrica, 49, 1057-1072. https://doi.org/10.2307/1912517
Directive 2009/28/EC of the European Parliament and of the Council of 23 April 2009 on the promotion of the use of energy from renewable sources and amending and subsequently repealing Directives 2001/77/EC and 2003/30/EC. 47 p. Retrieved from http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32009L0028&from=RO
Engle, G., & Granger, C. (1987). Co-Integration and error correction: Representation, estimation, and testing. Econometrica, 55(2), 251-276. https://doi.org/10.2307/1913236
European Parliament. (2016). Promotion of renewable energy sources in the EU, EU policies and Member State approaches, European Union. 24 p. Retrieved from http://www.europarl.europa.eu/RegData/etudes/IDAN/2016/583810/EPRS_IDA(2016)583810_EN.pdf
Eurostat. Statistics-explained. (2017). Energy production and imports. Retrieved from http://ec.europa.eu/eurostat/statistics-explained/index.php/Energy_production_and_imports
EViews 9 User’s Guide I, II. (2015). IHS Global Inc. Retrieved from www.eviews.com
Gasparatos, A., Doll, C. N. H., Esteban, M., Ahmed, A., & Olang, T. A. (2017). Renewable energy and biodiversity: Implications for transitioning to a Green Economy. Renewable and Sustainable Energy Reviews, 70, 161-184. https://doi.org/10.1016/j.rser.2016.08.030
IEA (International Energy Agency). (2015). Energy and climate change. World energy outlook special report. Retrieved from https://www.iea.org/publications/freepublications/publication/WEO2015SpecialReportonEnergyandClimateChange.pdf
Inglesi-Lotz, R. (2016). The impact of renewable energy consumption to economic growth: A panel data application. Energy Economics, 53, 58-63. https://doi.org/10.1016/j.eneco.2015.01.003
Jarque, C. M., & Bera, A. K. (1980). Efficient tests for normality, homoskedasticity and serial independence of regression residuals. Economics Letters, 6, 255-259. https://doi.org/10.1016/0165-1765(80)90024-5
Johansen, S., & Juselius, K. (1990). Maximum likelihood estimation and inferences on co-integration with approach. Oxford Bulletin of Economics and Statistics, 52, 169-209. https://doi.org/10.1111/j.1468-0084.1990.mp52002003.x
Lin, B., & Moubarak, M. (2014). Renewable energy consumption-Economic growth nexus for China. Renewable and Sustainable Energy Reviews, 40, 111-117. https://doi.org/10.1016/j.rser.2014.07.128
Mardani, A., Jusoh, A., Nor, K., Khalifah, Z., Zakwan, N., & Valipour, A. (2015). Multiple criteria decision-making techniques and their applications – a review of the literature from 2000 to 2014. Economic Research, 28(1), 516-571. https://doi.org/10.1080/1331677X.2015.1075139
Ocal, O., & Aslan, A. (2013). Renewable energy consumption-economic growth nexus in Turkey. Renewable and Sustainable Energy Reviews, 28, 494-499. https://doi.org/10.1016/j.rser.2013.08.036
Okyay, U., Ebru, A., & Fatih, Y. (2014). Energy consumption and economic growth nexus: Evidence from developed countries in Europe. International Journal of Energy Economics and Policy, 4(3), 411-419.
Ozturk, F. (2017). Energy consumption–GDP causality in MENA countries. Energy Sources, Part B: Economics, Planning, and Policy, 12(3), 231-236. https://doi.org/10.1080/15567249.2015.1072597
Pao, H. T., & Fu, H. C. (2013). Renewable energy, non-renewable energy and economic growth in Brazil. Renewable and Sustainable Energy Reviews, 25, 381-392. https://doi.org/10.1016/j.rser.2013.05.004
Pedroni, P. (2004). Panel cointegration: asymptotic and finite sample properties of pooled time series tests with an application to the PPP hypothesis: new results. Econ. Theory, 20, 597-627. https://doi.org/10.1017/S0266466604203073
Phillips, C. B., & Hansen, B. 1990. Statistical inference in instrumental variables regression with I (1) processes. Review of Economics Studies, 57, 99-125. https://doi.org/10.2307/2297545
Phillips, P. C., & Perron, P. (1988). Testing for a unit root in time series regression. Biometrika, 75, 335-346. https://doi.org/10.1093/biomet/75.2.335
Rafiq, S., & Salim, R. (2009). Temporal causality between energy consumption and income in six Asian emerging countries. Applied Economics Quarterly, 55(4), 1-16. https://doi.org/10.3790/aeq.55.4.335
Rafiq, S., & Salim, R. (2011). the linkage between energy consumption and income in six Asian emerging economies: An empirical analysis. International Journal of Emerging Market, 6(1), 50-73. https://doi.org/10.1108/17468801111104377
Sadorsky, P. (2009). Renewable energy consumption and income in emerging economies. Energy Policy, 37(10), 4021-4028. https://doi.org/10.1016/j.enpol.2009.05.003
Salim, R., & Bloch, H. (2009). Expenditures on business R&D and trade performance in Australia: Is there a link?. Applied Economics, 41, 351-361. https://doi.org/10.1080/00036840601007302
Stern, D. (2000). A multivariate cointegration analysis of the role of energy in the US economy. Energy Economics, 22, 267-283. https://doi.org/10.1016/S0140-9883(99)00028-6
Tugcu, C. T., Ozlturk, I., & Aslain, A. (2012). Renewable and non-renewable energy consumption and economic growth revisited: evidence from G7 countries. Energy Econ, 34, 1942-1950. https://doi.org/10.1016/j.eneco.2012.08.021
Wada, I. (2017). Energy production and economic growth in Saudi Arabia: Dynamic causality. Energy Sources, Part B: Economics, Planning and Policy, 12(6), 584-590. https://doi.org/10.1080/15567249.2016.1248872
Yildirim, E., Sarac, S., & Aslan, A. (2012). Energy consumption and economic growth in the USA: Evidence from renewable energy. Renewable and Sustainable Energy Review, 16(9), 6770-6774. https://doi.org/10.1016/j.rser.2012.09.004