Abstract
This article examines the causal relationship between renewable energy consumption and economic growth in case of Azerbaijan using annual data from 1992 to 2015. The Toda-Yamamoto causality test framework of vector autoregressive (VAR) model is utilized to test causal relationship between the variables. The results of this test reveal that there is unidirectional causality running from economic growth to renewable energy consumption. The study's findings might be a helpful tool for Azerbaijani policymakers and oil-rich economies to make renewable energy-related policy decisions.
Highlights
Energy is an important variable for economic growth (EG)
A vector autoregressive (VAR) model including all endogenous variables was estimated using a randomly determined lag interval, and a determination test of lag interval was applied to the residuals to identify the optimal lag interval in the research
Toda and Yamamoto causality test was utilized to confirm the direction of causality between renewable energy consumption (REC) and EG
Summary
Energy is an important variable for economic growth (EG). For producer energy is a main input. The use of non-renewable energy at the same time is linked to environmental problems such as climate change, the rapid rise of greenhouse gas emissions, CO2 and methane and global warming (Fotourehchi, 2017). The International Energy Agency (IEA, 2009) shows that energy supply trends are still economically, environmentally and socially unsustainable. This global nature of energy problems requires proper management and use of renewable energy sources (Mukhtarov et al, 2021; Karacan et al, 2021) Renewable energy is generally defined as energy derived from the solar, wind, geothermal energy, tide and waves, wastes and biomass. Given the increasing demand and limited supply, it is inevitable that renewable energy supplies will increase steadily (Apergis and Danuletiu, 2014)
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