Abstract
The purpose of this paper is to empirically and economically investigate the causal relationship between economic growth and energy consumption in five countries with high consumption during the period of 1968-2016. These countries are China, India, Japan, the United States, and Saudi Arabia. Using the cointegration relationship between the variables procedure and the Granger causality test. This period witnessed various changes in the economy, consumption, and production of these countries. The causality results for the countries show that there is a unidirectional, and bidirectional Granger causality between the variables. Therefore, the energy conservation policy should be designed with caution, as energy is an engine for GDP growth.
Highlights
There has been a growing interest in global energy issues and international policies required to maintain the energy that is important for global economic growth and social welfare, which aims to reduce the level of global poverty and reduce greenhouse gas emissions stemming from large and inefficient uses of energy
Data obtained from the National Bureau of Statistics (NBS) in China shows that the energy consumption in China increased from 131 million tons of oil equivalent (Mtoe) in 1965 to 3014 Mtoe in 2015, with gross domestic product (GDP) increasing from 172 billion yuan to 67.670 billion yuan (Dong et al, 2017)
The results show that GDP, energy consumption (EC), oil, and gas have unit root at the levels and they are stationary in the first difference
Summary
There has been a growing interest in global energy issues and international policies required to maintain the energy that is important for global economic growth and social welfare, which aims to reduce the level of global poverty and reduce greenhouse gas emissions stemming from large and inefficient uses of energy. There is debate as to whether energy conservation policies affect economic activity in countries or not; it is important to study the causal relationship between energy consumption and economic growth to provide advice and recommendations to countries as to what to do in the future to achieve a balance between economic growth and reduction of greenhouse gas emissions. It is important to include Japan in this study as one of the industrial countries and one of the largest consumers of energy, with this country recently enacting many laws to maintain energy (Matsukawa, 2016). In 1979 after the second oil crisis, the Japanese government imposed a law on energy conservation to implement measures to regulate energy consumption.
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