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The causal relationship between renewable electricity generation and GDP growth: A study of energy sources

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  • Ohler, Adrienne
  • Fetters, Ian

Abstract

This paper examines the causal relationship between economic growth and electricity generation from renewable sources (biomass, geothermal, hydroelectric, solar, waste, and wind) across 20 OECD countries over 1990 to 2008. The results from a commonly used panel error correction model find (a) a bidirectional relationship between aggregate renewable generation and real GDP, (b) biomass, hydroelectricity, waste, and wind energy exhibit a positive long-run relationship with GDP, (c) hydroelectricity and waste generation exhibit a short-run positive bidirectional relationship with GDP growth, and (d) biomass, hydroelectric, and waste electricity generation have the largest impact on real GDP in the long-run. We extend the analysis to consider the possibility of structural breaks and cross-sectional dependence. Accounting for cross-sectional dependence, we find that in the short-run, increases in biomass and waste generation negatively affect GDP, while aggregate renewable and hydroelectricity increase GDP. Energy conservation policies will positively impact GDP, if the policies cause decreases in biomass or waste energy but increase hydroelectricity and wind energy.

Suggested Citation

  • Ohler, Adrienne & Fetters, Ian, 2014. "The causal relationship between renewable electricity generation and GDP growth: A study of energy sources," Energy Economics, Elsevier, vol. 43(C), pages 125-139.
    • Handle: RePEc:eee:eneeco:v:43:y:2014:i:c:p:125-139
    DOI: 10.1016/j.eneco.2014.02.009
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    More about this item

    Keywords

    Renewable energy; Electricity generation; Panel; Granger-causality; Biomass; Waste energy; Cross-sectional dependence;
    All these keywords.

    JEL classification:

    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables
    • O5 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies
    • Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation
    • Q3 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation
    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy

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