Threshold effects of renewable energy consumption on economic growth under energy transformation

Abstract

China proposed that non-fossil energy consumption account for 20% in total energy consumption. EU increased the target of renewable energy consumption share from 27% to 35% in 2030. Energy transformation and increasing renewable energy consumption are important energy strategies for all countries at present. Then, is the impact of renewable energy consumption on economic growth positive or negative? Are there any differences in the direction or magnitude of the impact among countries or regions, and what are the determinants behind them? We apply panel threshold effect model to test threshold effects of renewable energy consumption on economic growth of EU. Empirical result shows: first, the impact of renewable energy consumption on economic growth is negative. Second, renewable energy consumption has significant threshold effects on economic growth. Third, now, energy consumption intensity and GDP per capita of most EU members are in the appropriate threshold regimes. In contrast, more and more EU members are in the high-subsidy group. Fourth, the average annual growth rates of renewable energy consumption showed no significant difference between high-subsidy and low-subsidy countries from 1990 to 2014. Therefore, subsidy with high economic cost is not the onlyeffective means to increase renewable energy consumption.