Energy-growth Nexus Research Articles

A Study Regarding the Relationship between Carbon Emissions, Energy Consumption, and Economic Development in the Context of the Energy Growth Nexus

As the EU strives to achieve its climate goals, it is becoming increasingly crucial to understand the complex relationships between economic activity, energy consumption, and carbon emissions. In this context, our paper aims to investigate the correlation between carbon emissions, energy consumption, and economic development. To fulfill our aim, we have used Eurostat and OECD data for the EU-27 member states for a period of 13 years (2010–2022), using a linear regression as the main analysis method. Our results have shown that there is a strong correlation between demand-based and production-based CO2 emissions as well as between production-based CO2 emissions and final energy consumption, while at the same time, our findings have shown that there is no direct correlation between energy consumption and economic development, aligning our study with the neutrality hypothesis of the energy growth nexus. This paper expands the ongoing discussion on sustainable development and climate change mitigation by conducting a thorough analysis of the EU-27 countries over a span of thirteen years. The results emphasize the need for integrated strategies that address both production and consumption emissions, emphasize the vital role of energy efficiency, and raise questions about the effectiveness of increasing energy consumption to enhance economic productivity or CO2 efficiency.

Energy Consumption, Bank Credit and Manufacturing Industry Performance: A Panel ARDL Analysis in Western Indonesia

The energy growth nexus is still being debated due to mixed empirical findings. This study seeks to establish a relationship between energy consumption, bank credit, and the performance of the manufacturing industry. This study also aims to determine the pattern of the dynamic causal relationship between energy use, bank credit, and the performance of the manufacturing industry in 17 provinces in western Indonesia. This study used secondary data from the Central Bureau of Statistics and the Financial Services Authority. Panel data are from 17 provinces in western Indonesia, spanning from Q1 2010 to Q4 2022 (2010Q1–2022Q4). We employed the panel ARDL and causality test to explore the connection between the variables of interest. The panel ARDL confirms that energy consumption and bank credit play a crucial role in boosting the performance of the manufacturing industry in the long term. This study found strong evidence to support the long-term feedback hypothesis of the energy-output growth nexus. However, in the short term, bank credit was statistically insignificant at all confidence levels. We recommended several policies to local governments and stakeholders, prioritizing the provision of more adequate energy infrastructure and greater access for industrial businesses to utilize banking services. Advancing infrastructure and developing the utilization of new renewable energy are proposed to support sustainable economic development.

How causality impacts the renewable energy, carbon emissions, and economic growth nexus in the South Caucasus Countries?

Renewable energy is essential for boosting economic expansion and lowering carbon dioxide emission (CO2) to achieve carbon neutrality. This study's objective is to investigate the relationship between the use of renewable energy, economic growth, and CO2 for South Caucasus Countries. For analysis purposes, time series methods were applied on the panel data. Second-generation unit root and cointegration tests were used to test the cross-sectional dependence. Afterward, panel causality and panel VAR techniques were performed to examine the relationship between the variables. Based on feedback hypothesis, results of our causality analysis revealed a bidirectional causality relationship between growth and renewable energy consumption. Moreover, we revealed unidirectional causality from CO2 to renewable energy and from growth to CO2 emission. We also found that the effect of a shock in renewable energy on growth is increasing, and on CO2, it is decreasing implying that renewable energy consumption will trigger growth and have a reducing effect on CO2 emissions. We portrayed significant workable implications for policymakers, regulation bodies, companies, stakeholders, and managers. Results from this study should be extrapolated with caution since their applicability is limited to the South Caucasus Countries. In addition, the research heavily depends on summaries, which may obscure regional differences. In the future, researchers may want to dig deeper into the data and examine the subtle effect of renewable energy policy nationally. Moreover, including socio-economic aspects and technical improvements in the research might give a more thorough picture of the dynamics at play.

Assessing energy consumption and economic growth interrelations in Asia-Pacific: A multivariate approach with panel FMOLS and bootstrap Granger causality tests

This study investigates the cointegration and causal relationship between energy consumption and economic growth using data from 16 Asian and Pacific countries from 1970 to 2010. The expanded production function is used in this investigation; this function considers not only labor but also financial resources. This study investigates whether or not a rise in energy demand is associated with a healthy economy. Human capital, in addition to material and labor resources, is taken into account by this operation. One of the first studies to adopt a multivariate method and add human capital was undertaken on the energy-growth nexus. Using the panel unit root and cointegration tests, this study confirms the existence of a long-run cointegrating connection between these variables. These studies recognize the presence of cross-sectional interdependence, according to specific reports. The significance of considering the interconnection of various countries is confirmed by comparing estimates from panel heterogeneous fully modified ordinary least squares (FMOLS) models with those from unceasingly efficient and fully modified models. Nonetheless, the bootstrap panel Granger causality test findings demonstrate that economic growth is a causal factor in rising energy consumption in the region, indicating that the relationship is not constant across countries.

Energy-growth nexus in Australia and New Zealand for the past 150years-evidence from time-varying and quantile Granger causality analysis.

Using historical data on energy from (Malanima 2020) and GDP from the Maddison Project Database, this paper investigates the energy-growth nexus in a less-studied region, mainly Australia and New Zealand, since 1870. The long annual series allow meaningful application of recently developed time-varying and quantile Granger causality analysis. Results indicate that there is a bi-directional Granger causal relationship between economic growth and energy, coal, and oil consumption at both ends of the distribution, and during various time periods over the past 150years. Little evidence is found on the Granger causal relationship from gas consumption to economic growth, but some evidence on the direction from economic growth to gas consumption. The Granger causal relationships between electricity consumption and GDP change over time, but results suggest much closer links between the two in most recent decades, and big (positive and negative) changes in electricity consumption significantly Granger causes economic growth.

The role of economic complexity in shaping the energy-growth nexus: Evidence from cross-country panel data

The study investigated the interplay between energy consumption (EN), economic growth (EG), and economic complexity across 59 countries from 2000 to 2018. Employing panel data methods, the research examined various models to estimate long-term effects while addressing unobserved heterogeneity and potential biases. Results indicate significant relationships between EG, EN, and economic complexity. Notably, the economic complexity index (ECI) displayed a positive effect on economic development, while trade openness and foreign direct investment showed varying impacts. The study identified a positive association between EG and EN, suggesting that increased energy consumption accompanies economic growth. However, a higher capital-to-labor ratio was associated with lower EN, indicating a substitution effect. Of particular note is the significant positive impact of the interaction between ECI and EN on GDP across various models. In the Country Fixed Effects Model, a one-unit increase in the interaction correlated with a 0.026 unit increase in GDP (p < 0.001). Similarly, significant positive relationships were observed in the Panel EGLS and FMOLS models, with coefficients of 0.055 and 0.031, respectively (p < 0.001 and p = 0.011). Conversely, all models consistently demonstrated a negative relationship between economic complexity and GDP, with coefficients ranging from -0.062 to -0.089 (p < 0.001). These findings underscore the importance of considering economic complexity and energy consumption in policy interventions aimed at promoting sustainable economic growth. Policymakers are encouraged to adopt comprehensive approaches that account for the complex interplay of various factors influencing economic development and energy consumption to formulate effective strategies.

The energy-growth nexus in Canada: new empirical insights.

Over the past two decades, numerous developed and developing nations have witnessed a remarkable shift from manufacturing-based economies to those that center around the service sector. This development has led to a staggering growth in the consumption of energy-intensive goods, and Canada has not been immune to this trend. Despite being home to abundant energy reserves, the country's economic expansion has manifestly relied on prodigious energy consumption. Within this context of symbiotic energy-economic growth, this study investigates the empirical relationship between energy consumption and economic growth using Canadian time-series data from 1980 to 2020. In doing so, this paper offers a vital contribution to the development of theoretical frameworks within the sphere of endogenous growth. Besides, to arrive at empirical findings, a model known as the autoregressive distributed lag (ARDL) model, renowned for its ability to discern both short- and long-term coefficients, is employed. The results reveal that economic growth has a significant positive long-run effect on energy consumption and other explanatory variables. All variables other than trade openness demonstrate a positive relationship with economic growth in the short run. From Toda-Yamamoto causality test, it is evident that there exist bidirectional causal links between economic growth and energy consumption and between economic growth and financial development. Several unidirectional causalities were also observed for other variables. Based on these findings, it is recommended that Canada boosts its investment in energy infrastructure, especially in rural and backward regions, to deliver necessary energy services. An optimal trade-off between Canada's vast energy resources and economic growth can perhaps be achieved by minimizing the disparity in access to energy services across all parts of the country. Other policy implications are discussed.

Disaggregating renewable energy-growth nexus: W-ARDL and W-Toda-Yamamoto approaches

The research on the effects of economic growth on renewable energy faces two significant limitations that may impede the formulation of accurate and effective renewable energy policy. The first limitation pertains to the use of an aggregate methodology, which relies solely on aggregated data for analyzing the relationship between renewable energy and economic growth. The second limitation is the absence of a systematic search for empirical models that could minimize estimation errors. In light of these constraints, this study proposes a disaggregate analysis to examine the concurrent effects of the components of economic growth on the components of aggregate renewable energy. Second, the research introduces two methodologies: wavelet-based and error-adjusted variants of the Auto-Regressive Distributed Lag Model (ARDL) and the Toda-Yamamoto Causality Test. The study presents two major findings. First, it reveals substantial differences between the effects of aggregate growth and growth components on aggregate renewable energy and its components in the ten countries with the highest carbon emissions. Second, the study demonstrates that the predictive accuracy of wavelet-based and error-adjusted ARDL and Toda-Yamamoto tests (W-ARDL and W-Toda-Yamamoto) for all estimated models is significantly higher than that of non-wavelet-based tests. The study suggests prioritizing a disaggregate approach to the renewable energy-growth nexus and utilizing wavelet-based and error-adjusted econometric techniques to improve the accuracy and efficiency of renewable energy policy.

Intelligent Effects and Green Development in China: Evidence from Energy-Growth Nexus

Intelligent Effects and Green Development in China: Evidence from Energy-Growth Nexus

Energy-growth nexus for ‘Renewable Energy Country Attractiveness Index’ countries: Evidence from new econometric methods

This study explores the connections between renewable energy consumption (REC), non-renewable energy consumption (NREC), gross fixed capital formation (GFCF), the labor force (LF), and economic growth (GDP) in Renewable Energy Country Attractiveness Index (RECAI) countries for 1991–2016. We quantify the nexus between REC, NREC, and GDP while utilizing a production model framework and including the measures of labor and capital, for suggesting a phase-wise strategy to attain the sustainable development goals. We use robust methodologies including Lagrange Multiplier (LM) panel unit root tests with trend shifts, Westerlund cointegration test, LM bootstrap technique for cointegration with breaks, continuously updated fully modified (CUP-FM) and continuously updated bias-corrected (CUP-BC) estimators, Augmented Mean Group (AMG) approach, fully modified ordinary least squares, dynamic ordinary least squares, Canonical Cointegrating Regression (CCR), and panel causality test proposed by Canning & Pedroni. We compute non-parametric time-varying coefficients with fixed effects for seeing the impact of GFCF, LF, REC, and NREC on GDP. Our results press upon policymakers to shift toward clean energy and REC for attaining the environmental goals (SDGs 6, 7, 13, and 15) and the economic goals (SDGs 1, 2, 8, and 10). While this shift would help developed economies, which have already attained the economic goals, to progress on the front of environmental goals, it would enable developing countries to progress on both fronts in a balanced manner.

The Threshold Role of FDI Flows in the Energy-Growth Nexus: An Endogenous Growth Perspective

In this paper, we have investigated the implications of the threshold effect of changes in FDI inflows for the nexus between energy consumption and economic growth in eight under-researched sub-Saharan African countries for the period 1971–2016. The countries are Benin, Congo, Kenya, Nigeria, Senegal, South Africa, Sudan, and Zambia. Using the lag-augmented VAR (LAVAR) model (corrected for cross-sectional dependence), we develop an empirical framework tightly linked to the endogenous growth model that allows for a threshold effect of changes (strength and weakness) in FDI inflows on the nexus. Our findings show that the FDI inflows matter for the causal link between energy consumption and economic growth in some countries, although, for the cross-section as a whole, our bootstrap simulation supports the neutrality hypothesis. The overall results suggest that an energy demand policy, such as an energy conservation policy, should not cause any significant adverse side-effects to economic growth in those sub-Saharan African countries. Policy implications of the threshold effect for the nexus for individual sub-Saharan African countries are also provided.

Renewable energy and green economic growth nexus: Insights from simulated dynamic ARDL

The nexus between renewable energy and green economic growth is multifaceted and promising. By transitioning to renewable energy sources, countries can simultaneously address climate change, promote sustainable development, and stimulate economic growth. The past few decades have seen increasing environmental hazards because of the ecological pressure exerted by humanity. Attaining sustainable development without harming the environment has immense importance in recent strands of literature. Thus, we employ novel dynamic ARDL simulations to explore the significance of the renewable energy and green economic growth nexus in both the short and long run, for large developed countries. Our findings indicate that green economic growth and economic globalization significantly enhance renewable energy consumption, and there is a long-term cointegration among the variables. The study further reveals that emissions are considerable despite the adoption of renewable energy in these highly industrialized countries. By prioritizing the transition to renewable energy, creating green jobs, enhancing energy efficiency, fostering innovation and research, and strengthening international cooperation, G-20 countries can lay the foundation for a sustainable and prosperous future. It is imperative that these policy implications are implemented effectively to address the urgent challenges of climate change and promote green economic growth.

Expanding the tourism energy growth nexus: an empirical analysis within the Eurozone

Expanding the tourism energy growth nexus: an empirical analysis within the Eurozone

Exploring the moderating role of foreign direct investment in the renewable energy and economic growth nexus: Evidence from West Africa

This study contributes to the renewable energy consumption and economic growth discourse by examining how foreign direct investment moderates this relationship for a panel of 15 West African countries from 1990 to 2021. Applying the Panel-Corrected Standard Errors and the Feasible Generalized Least Squares techniques, the study shows that renewable energy consumption hinders economic growth in West Africa. In addition, foreign direct investment is found to have a positive impact on economic growth. The findings further reveal that the interaction between renewable energy consumption and foreign direct investment has a positive impact on economic growth. Thus, foreign direct investment boosts renewable energy consumption to positively impact economic growth in West Africa.

Modeling the Nexus of Renewable and Non-Renewable Energy Consumption and Economic Progress in Southeastern Europe: A Panel Data Analysis

As the fourth industrial revolution drives innovation and economic growth, the energy sector is increasingly recognized for its significant economic contribution. This research aims to investigate the relationship between economic growth and renewable and non-renewable energy consumption in nine southeastern European countries using panel estimation techniques and causal inference. This research employs a unique approach to modeling the energy–growth nexus, incorporating interaction terms to better understand the impact of renewable energy on real GDP growth. The findings are a valuable addendum to the current body of research on the effects of renewable energy consumption on economic growth, and the results contribute to narrowing the empirical research gap in the econometrical field of panel data estimation and endogeneity. This study uses the fully modified OLS (FMOLS) technique for heterogeneous panels to estimate coefficients, while the error correction model (ECM) is used to estimate the cointegration vector between energy variables and GDP. The non-causality test by Dumitrescu and Hurlin (2012) evaluates the causation between energy variables and economic output. Empirical findings indicate that both renewable and non-renewable energy consumption positively affect economic growth. The outcomes of this study hold significant policy ramifications in terms of prioritizing reformation and investment towards specific sectors to foster capital infusion into renewable energy and energy efficiency projects and initiatives, consequently advancing sustainable economic growth.

Exploring the Impact of Economic Growth on the Environment: An Overview of Trends and Developments

In our modern world, energy keeps the global economy running, and economic growth concerns are profoundly interrelated with environmental quality issues. Interestingly, scientists engage with empirical research to identify the impacts and causalities at the interface of economic activities, energy supply, and demand. The importance of the present study lies in a discussion of all contemporary research efforts bridging two strands of empirical literature in environmental economics: developments in energy growth nexus discussion and the environmental Kuznets curve. Furthermore, it highlights the inclusion of untested explanatory variables and the impacts on environmental degradation levels. In the context of the EKC hypothesis, the most popular indicators are greenhouse gas emissions (GHGs) and carbon dioxide emissions in conceptualizing environmental degradation. A review of relevant empirical studies disclosed additional research opportunities that can consider currently untested and less visible proxies of economic growth. For both strands in the literature, results differ based on the group of countries investigated, the econometric models adopted, the format of data, e.g., time series or panel analyses, the time frames due to data availability, and the proxies used to conceptualize energy, environmental degradation, and economic growth. Practical implications indicate that environmental degradation can be avoided or significantly limited within sustainable economic growth to reduce carbon dioxide emissions and increase the use of renewables in the energy mix. Furthermore, one particular implication is the concept of energy efficiency to reduce relevant demand to produce the same outcome or task.

Energy and Economic Growth Nexus: A Long-run Relationship in Indonesia

Energy plays an important role in economic growth in which it affects total factor productivity (TFP). Energy conservation efforts to address global climate change may adversely affect economic growth, particularly in the long run. This study analyses the short- and long-run relationship between energy consumption (both non-renewable (NREC) and renewable (REC)) and economic growth in Indonesia within the period of 1985 to 2019. Using the vector-error correction model (VECM), the paper discovered a short-run unidirectional causality from NREC and REC to economic growth. Economic growth in Indonesia is dependent on energy consumption. The finding proves the growth hypothesis in the energy and economic growth nexus (EGN). In the long run, only NREC has a unidirectional causality to economic growth, while REC is independent. REC supports the neutrality hypothesis rather than the growth hypothesis. The neutrality of REC in promoting economic growth in the long run indicates that Indonesia remains highly dependent on NREC to generate economic growth. Consequently, lowering NREC will adversely affect economic growth both in the short and long run. Nevertheless, Indonesia has signed a commitment to reduce carbon emissions vis a vis NREC in the context of climate change. The findings suggest that Indonesia should conduct energy transition toward REC, while conserving NREC in addition to accumulating physical and human capital to sustain high economic growth in the long run.

Revisiting the Energy-Growth nexus with debt channel. A wavelet time-frequency analysis for a panel of Eurozone-OECD countries

<abstract> <p>In this paper, continuous wavelet decompositions regarding the notions of coherence and phase are used to analyze the time-frequency dynamics of the existing relationships between energy supply and economic growth for a group of European countries. The objective is to identify both the intensity and the direction of the relationship over time and across frequencies. We also study the existence of a debt channel implying an indirect relationship between energy and growth. Our results show the complexity of the energy supply-growth relationship composed by direct effect at the short run and indirect effects through debt channel at the mid and long run. The countries with the highest debt/GDP ratio are more subject to such direct and indirect effects than others where only short run direct effect is noted.</p> </abstract>

Renewable and Non-Renewable Energy Consumption on Economic Growth: Evidence from Asymmetric Analysis across Countries Connected to Eastern Africa Power Pool

Though various studies have examined the energy-growth nexus, the non-linear asymmetry relationship between economic growth and energy use has received little attention. In order to investigate the stratified asymmetric relationship between total, renewable, and nonrenewable energy consumption and economic growth in nine Eastern African nations connected via the Eastern Africa power pool (EAPP) and power trade (EAPT), this study used common correlated effect means group (CCEMG), nonlinear Autoregressive Distributed Lags (NARDL) approaches, and asymmetric causality tests from both a country and regional perspective. The time span is 1980 to 2017. The results from cross-sectional dependence confirms the existence of cross-sectionally dependence, findings from unit root and westerlund cointegration agreed the presence of long-run relations between variables and support the use of NARDL. CCEMG results reveal that energy in total contributes to growth, while nonrenewable energy reduces economic growth across the panel of selected countries. Nonlinear results from positive and negative shocks to energy as total, renewable and nonrenewable energy use have mixed nonlinear effect (positive and negative) on economic growth in long-run across the selected countries, while symmetric effect was unavailable in several countries. Bi-directional causation was noted between growth and all considered energy types at the panel of seven countries, and between energy as total and nonrenewable and growth in Ethiopia and Sudan, while all of the examined nations showed a strong one-way causal relationship between growth and renewable and nonrenewable energy, Rwanda showed a neutral relationship between growth and energy sources. For sustainable economic growth, policymakers, investors, and government officials may use this information to help them develop energy policies that promote renewable energy output while reducing reliance on nonrenewable energy in the region.

The energy-growth nexus in 3 Latin American countries on the basis of the EKC framework: in the case of Argentina, Brazil, and Chile

In this paper, the effects of economic growth and four different types of energy consumption (oil, natural gas, hydroelectricity, and renewable energy) on environmental quality in terms of carbon dioxide (CO2) emissions were examined within the framework of the Environmental Kuznets Curve (EKC) for three Latin American countries, namely, Argentina, Brazil, and Chile, from 1975 to 2018. The autoregressive distributed lag (ARDL) in the form of Error Correction Mechanism (ECM) was used to verify the validity of the EKC hypothesis and the impacts of the variables in the short and the long run alike. Furthermore, the Toda-Yamamoto Granger causality test was carried out to identify the direction of causality between the variables. From ARDL-ECM estimation, the EKC was confirmed (inverted U-shaped curve between income growth and CO2 emissions) only in Argentina in the long run but not in Brazil and Chile. Based on the findings, renewable energy can have a great potential in reducing CO2 emissions in the future, but this advantage has not been fully exploited yet since a significant negative impact on CO2 emissions was only found in Chile. Also, the use of other less carbon-intensive energy sources such as natural gas and hydropower if they could be combined with renewable energy would be of great benefit and contribute to enhancing environmental quality and energy security in the short and the medium term and to successful low-carbon energy transition in the long run in Argentina, Brazil, and Chile.