Renewable energy consumption and economic growth nexus: Evidence from a threshold model

Chaoyi Chen, Mehmet Pinar and Thanasis Stengos

Energy Policy, 2020, vol. 139, issue C

Abstract: The existing literature on renewable energy consumption and economic growth nexus produces mixed results as the effect of renewable energy consumption on economic growth can be either positive, negative or not significant. This paper examines the causal link between renewable energy use and economic growth by employing a threshold model using a 103-country sample in the 1995 to 2015 period. We find that the relationship between renewable energy consumption and economic growth depends on the amount of renewable energy used. Our results demonstrate that the effect of renewable energy consumption on economic growth is positive and significant if and only if developing countries or non-OECD countries surpass a certain threshold of renewable energy consumption. However, if developing countries use renewable energy below a given threshold level, the effect of renewable energy consumption on economic growth is negative. However, we also find that renewable energy consumption has no significant effect on economic growth in developed countries and a positive and significant effect on economic growth in OECD countries. The findings of this paper suggest that for developing countries to realize positive economic growth from their investment to renewable energy, they need to surpass a certain threshold of renewable energy consumption.

Keywords: Renewable energy consumption; Economic growth; Threshold; Non-linear effects; Panel data; OECD countries (search for similar items in EconPapers)
JEL-codes: C24 O13 Q2 Q43 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (112)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:enepol:v:139:y:2020:i:c:s0301421520300537

DOI: 10.1016/j.enpol.2020.111295

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