Renewable energy consumption and per capita income: An empirical analysis in Finland

Abstract

Over the past decade, population growth and industrialization have been the driving force behind the increase in greenhouse gas emissions. The implementation of modern technologies capable of producing energy from renewable sources is insufficient to meet the demand for energy, which is experiencing a strong growth trend. In the last decade, it has been possible to observe a decrease in the use of oil and a significant increase in renewables, the inconsistency and unmanageability of which make it impossible to balance supply and demand. However, these have a positive impact not only on the environment, but also on the development in the economic field and employment. This study aims to examine the current relationship between economic growth and renewable energy consumption, for the period 1990–2019, on the territory of Finland, through a Granger causality test. The variables used for this work are renewable energy consumption, GDP, trade, and gross capital formation. The results are significant and lead to important policy implications; in fact, the analysis shows a feedback effect between renewable energy consumption and economic growth, and, through the Granger causality test, it is shown how renewable energy consumption can affect the rate of future growth.