The Effect of Renewable and Non-Renewable Energy on Economic Growth: A Panel Cointegration Analysis for the Top Renewable Energy Consumers (1970–2023)

Özlem Ülger Danacı ()
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Özlem Ülger Danacı: Department of Economics, Batman University, Batman 72100, Turkey

Energies, 2025, vol. 18, issue 17, 1-17

Abstract: The relationship between renewable (REN) and non-renewable (NREN) energy and economic growth plays a fundamental role in sustainable development. The number of studies on this relationship in countries with the highest REN consumption is limited. This study analyzes the effects of REN and NREN on economic growth between 1970 and 2023, focusing on the ten leading countries in REN consumption. These countries constitute an appropriate sample for analysis, not only due to their high REN capacity but also because they represent diverse levels of economic development. For this purpose, second-generation panel data methods were employed to investigate the long-run effects, taking into account cross-sectional dependence and heterogeneity in the dataset. The CADF unit root test developed by Pesaran indicated that all variables are stationary at their first differences. The Westerlund panel cointegration test confirmed the existence of a long-run relationship among the variables. Long-run coefficients were estimated using the Common Correlated Effects Mean Group (CCE) approach developed by Pesaran and the Augmented Mean Group (AMG) estimators proposed by Bond & Eberhardt and Eberhardt & Teal. The results revealed that renewable energy consumption has a positive and significant effect on economic growth, while fossil fuel consumption continues to have a favorable effect on growth. However, the negative and significant effect of primary renewable energy production suggests that technological deficiencies and efficiency problems in current production structures may play a role. Overall, this study highlights the necessity of aligning energy policies with both environmental sustainability and economic growth objectives.

Keywords: renewable energy consumption; non-renewable energy; economic growth; panel cointegration (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2025
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