Renewable Energy Consumption and Economic Growth in Nine OECD Countries: Bounds Test Approach and Causality Analysis

Abstract EN

The purpose of this paper is to investigate the short-run and long-run causality between renewable energy (RE) consumption and economic growth (EG) in nine OECD countries from the period between 1982 and 2011.

To examine the linkage, this paper uses the autoregressive distributed lag (ARDL) bounds testing approach of cointegration test and vector error-correction models to test the causal relationship between variables.

The co-integration and causal relationships are found in five countries—United States of America (USA), Japan, Germany, Italy, and United Kingdom (UK).

The overall results indicate that (1) a short-run unidirectional causality runs from EG to RE in Italy and UK; (2) long-run unidirectional causalities run from RE to EG for Germany, Italy, and UK; (3) a long-run unidirectional causality runs from EG to RE in USA, and Japan; (4) both long-run and strong unidirectional causalities run from RE to EG for Germany and UK; and (5) Finally, both long-run and strong unidirectional causalities run from EG to RE in only USA.

Further evidence reveals that policies for renewable energy conservation may have no impact on economic growth in France, Denmark, Portugal, and Spain.