Share:


Impact of renewable energy consumption on economic growth: evidence from European Union countries

    Georgeta Soava Affiliation
    ; Anca Mehedintu Affiliation
    ; Mihaela Sterpu Affiliation
    ; Mircea Raduteanu Affiliation

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
Published in Issue
May 17, 2018
Abstract Views
4892
PDF Downloads
3738
Creative Commons License

This work is licensed under a Creative Commons Attribution 4.0 International License.

References

Alper, A., & Oguz, O. (2016). The role of renewable energy consumption in economic growth: Evidence from asymmetric causality. Renewable and Sustainable Energy Reviews, 60, 953-959. https://doi.org/10.1016/j.rser.2016.01.123

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