An investigation on the causality link between renewable energy consumption and economic growth in selected Euro-Area countries

Abstract

ABSTRACT Our paper analyzes the causality link between renewable energy consumption and economic growth in selected Euro-Area countries. We conduct our analysis for Austria, Belgium, Finland, Germany, Spain, Italy, Portugal, and the Netherlands in the period from 1990 to 2020 by employing a recent panel causality test that takes structural breaks into account. First, we examine the stationary characteristics of data by employing a panel unit root test proposed by Bahmani-Oskooee (2014). In the second stage, we use the panel Fourier Toda Yamamoto (PFTY) test proposed by Yilanci and Gorus (2020). We find a one-way causal link between economic growth and renewable energy consumption for the panel supporting the evidence of the validity of the conservative hypothesis. Similarly, there are one-way causality runs from economic growth to renewable energy consumption in Spain, Italy, and Netherlands. Furthermore, there is a one-way causality run from renewable energy consumption to economic growth only in Finland supporting the evidence of the validity of the growth hypothesis. Nevertheless, we could not find any causality connection between renewable energy consumption and economic growth for the panel and also for Austria, Belgium, Germany, and Portugal on a country basis, thus supporting the evidence of the validity of the neutrality hypothesis.