Analysis of Energy-Economic Dynamics in Canadian Provinces: Insights from Data Analytics

Abstract

Abstract This paper conducts study of the relationship between end-use energy demand and economic growth as indicated by the Gross Domestic Product (GDP) on a province-level within Canada. There is abundant literature investigating the direction of causality between energy use and economic growth. However, these studies tend to focus on country units or groupings of countries. Additionally, the direction of causality between energy and economic growth has yielded mixed results, which depend on the econometric methods used, the time period, and the inclusion of other economic growth/productivity factors, such as labour and capital. The contribution which this paper seeks to make is to determine the relationship between GDP and energy use within the sub-national units of Canada. This is especially important to help shape the broader conversation about the potential distributional impact of climate change policies on the economic well-being of the sub-nationals of Canada. This paper utilizes the well-known Cobb – Douglas functional form to examine the relationship between inputs, end-use energy demand, and output, defined as GDP for the provinces. Population, End Use Energy Demand and provincial level GDP time series data from 1995 to 2021 are obtained from StatsCan. Our descriptive data analysis revealed that the highly ranked provinces by growth rate of energy use per capita were not necessarily top ranking by GDP per capita growth rate. Taken together, since year 2000, 10 of out of Canada’s 13 provinces and territories have achieved growth in GDP per capita while reducing their Energy use per capita. Additionally, Granger causality showed broadly that the sub-nationals of Canada can be classed majorly as either having neutral relationship between energy and economic growth (46%) or are in the category where economic growth drives the energy use per capita (39%).