An Analysis of the Relationship between Energy Trilemma and Economic Growth

Abstract

This study analyzed the relationship between energy trilemma (ET) and economic growth in 109 countries between 2000 and 2020 across income levels and regions. This study constructed an extended Cobb-Douglas production function including three elements of ET such as energy security, energy equity, and environmental sustainability as their effects on economic growth differ by income level and region. The methodology of this study differs from that of previous studies, which utilized the representative value of ET based on principal component analysis. To analyze the panel series, this study utilized econometric procedures, panel regression of pooled ordinary least squares (OLS), feasible generalized least squares (FGLS), fixed effects, and dynamic panel analysis of generalized methods of moments (GMM) by three income levels. In addition, this study undertook a time series analysis between ET and economic growth for each country. The results showed that each element of ET is not balanced. Moreover, each element can contribute differently to economic growth due to differences in income levels and regions. This study suggested that a balanced environmental policy reflecting various aspects of ET is required and can contribute to the economic growth.