The relationship between renewable energy consumption and economic growth

Abstract

Purpose The purpose of this study is to investigate the relationship between renewable energy and economic growth of Bulgaria. Design/methodology/approach This study analyzes the relationship between renewable energy and economic growth of Bulgaria for the period 1990-2016, based on annual data, by using the Toda–Yamamoto analysis and Autogressive Distrubuted Lag (ARDL) bound test. This period is characterized by the democratization of the Balkans and several crisis cycles in Bulgaria. Renewable energy consumption (REC, percentage of total final energy consumption), renewable electricity output (REO, percentage of total electricity output) and economic growth (GDP constant 2010 US$) were used. The levels or differences of the variables that are stationary were investigated using the augmented Dickey–Fuller (ADF), Philips–Perron (PP) and Kwiatkowski-Philips-Schmidt-Shin (KPSS) unit root tests. Findings Three different results were obtained from this study. One showed that renewable energy consumption and renewable electricity output are the causes of economic growth. Another result of this study is that economic growth and renewable electricity output are the causes of renewable energy consumption. The last result is that economic growth and renewable energy consumption are not causes of renewable electricity output. There was no long-term relationship between variables. Research limitations/implications The ARDL and Toda–Yamamoto tests were used because of lack of data sets. Thus, it is estimated that there is no long-term relationship. Originality/value This study is an original work for Bulgaria, showing the results of the relationship between renewable energy and economic growth. In line with the results of this study, renewable energy projects related to Bulgaria can be predicted.