Effect of energy consumption on economic growth and sustainability: Panel evidence from PCSE and FGLS

Titiksha Das and Debasis Chakraborty

ECONOMICS AND POLICY OF ENERGY AND THE ENVIRONMENT, 2024, vol. 2024/2, issue 2, 37-53

Abstract: Energy-growth nexus studies use measures of income to assess the impact of energy consumption on economic growth. However, exclusion of externalities and environmental costs has made these studies a partial one. The recent Energy-Sustainability nexus studies deploy measures of sustainability to assess the impact of energy consumption on sustainable economic welfare rather than just economic growth. The primary objective of the study is to compare the Energy-Growth nexus with Energy-Sustainability nexus for developed countries, developing countries, and transition economies. The time period of the study is from 2000 to 2014. The methodologies used in the study are Feasible Generalized Least Square (FGLS) and Panel Corrected Standard Error (PCSE). The results suggest that renewable energy consumption helps (hurts) economic growth and sustainable development of developed (developing) nations but non-renewable energy consumption hurts (helps) economic growth and sustainable development of developed (developing) nations. However, both renewable and non-renewable energy consumption support economic growth and sustainable development for transition economies. Energy policy recommendations are in favor of strengthening carbon pricing policies, encouraging investment in clean energy technologies, stimulating research and development to overcome challenges of complete energy transition and successful decoupling of economic growth from fossil fuel energy. Moreover, sustainability policies must ensure that economic benefits and welfare arising from renewable energy sources must complement economic growth and sustainable development substantially enough to outweigh the economic costs.

JEL-codes: Q01 Q43 Q56 (search for similar items in EconPapers)
Date: 2024
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