Abstract
Energy is crucial to economic progress, but the contemporary worldwide population increase that demands greater energy generated from conventional exhaustible resources, an energy price upsurge, and environmental concerns, imperils sustainable economic growth. Nevertheless, switching to renewable energy produced from naturally replenished resources promotes energy security, likewise addressing issues such as global warming and climate change. This paper aims at exploring the influence and causal relation between renewable energy, both overall and by type, and sustainable economic growth of European Union (EU)-28 countries for the period of 2003–2014. We notice that the mean share of renewable energy in the gross final energy consumption is 15%, while the mean share of renewable energy in transport fuel consumption is 3%, which are below the thresholds of 20% and 10%, respectively, as set by the EU Directive 2009/28/EC. By estimating panel data fixed-effects regression models, the results provide support for a positive influence of renewable energy overall, as well as by type, namely biomass, hydropower, geothermal energy, wind power, and solar energy on gross domestic product per capita. However, biomass energy shows the highest influence on economic growth among the rest of renewable energy types. In fact, a 1% increase of the primary production of solid biofuels increases GDP per capita by 0.16%. Besides, cointegrating regressions set on panel fully modified and dynamic ordinary least squares regressions confirm the positive influence related to the primary production of renewable energies on economic growth. A 1% increase in primary production of renewable energies increases GDP per capita by 0.05%–0.06%. However, the results of Granger causality based on panel vector error correction model indicate both in short-run and long-run a unidirectional causal relationship running from sustainable economic growth to the primary production of renewable energies, being supported the conservation hypothesis.
Highlights
Energy represents a vital factor for achieving sustainable economic growth [1], but the contemporary economic welfare is endangered by circumstances such as increased energy demand driven by the increase of world population which has entailed the quick consumption of traditional energy resources such as oil, coal, and natural gas, besides energy price rises, and discharging of harmful gases to the atmosphere
The results of Granger causality based on panel vector error correction model indicate both in short-run and long-run a unidirectional causal relationship running from sustainable economic growth to the primary production of renewable energies, being supported the conservation hypothesis
Our goal is to investigate the linkages between renewable energy production (PRE), energy dependence (ED), and gross domestic product per capita (GDPC), through the Granger causality based on panel vector error correction model (PVECM), by following the procedure described in previous studies [8,41,42,43,46,48,53,62,67]
Summary
Energy represents a vital factor for achieving sustainable economic growth [1], but the contemporary economic welfare is endangered by circumstances such as increased energy demand driven by the increase of world population which has entailed the quick consumption of traditional energy resources such as oil, coal, and natural gas, besides energy price rises, and discharging of harmful gases to the atmosphere. The lack of access to energy indicates a deficient situation as regards lowering poverty and accelerating development [2], but climate change issues have emerged due to greenhouse gas emissions caused by burning fossil fuels [3]. Substitutes for fossil fuels, which are detrimental for the environment, are renewable energy resources that fulfill the main energy requests actual economies are confronted with, regular renewal, less pollution, decreasing reliance on imported sources [6], enhanced employment [7], no security or safety concerns [8]. A sustainable economy relies on the flow of resource usage and the value of externalities being created [9] and comprises three pillars: environmental, economic and social dimensions [10]
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