Renewable and Non-Renewable Electricity Consumption, Carbon Emissions and GDP: Evidence From Mediterranean Countries

The imperative to reduce Co2 emissions is stronger than ever. According to many studies, renewable energy (electricity) has one of the most significant cost-effective potentials for reducing energy-related greenhouse gas emissions. Increasing the supply of renewable energy would allow for the replacement of carbon-intensive energy sources and significantly reduce pollutant emissions. The major focus of this article is to investigate the causal relationship between renewable and non-renewable electricity consumption, GDP and CO2 emissions for the North and South shores of Mediterranean over the period 1980-2012. Panel unit root tests, cointegration technique allowing cross-section dependence among the panel and causality tests are used to investigate this relationship. The results provide panel empirical evidence that there is a short-run bidirectional causality between GDP, renewable electricity consumption and CO2 emissions; and between non-renewable electricity consumption, GDP and renewable electricity consumption. As for the long-run causal relationship, the result indicates that there is bidirectional causality between non-renewable electricity consumption and CO2 emissions. However, there is evidence of unidirectional causal relationship running from GDP to CO2 emissions and non-renewable electricity consumption; from renewable electricity consumption to CO2 emissions. The findings imply that non-renewable electricity consumption and economic growth stimulate CO2 emissions in Southern and Northern Mediterranean countries while renewable electricity reduces it. Therefore, expansion of renewable energy sources is a strategic plan for addressing energy security and reducing carbon emissions to protect the environment for future generations.