Renewable and Non-renewable Energy Consumption and Economic Growth: Empirical Evidence from Panel Error Correction Model

Abstract

This study examines the relationship between energy consumption and economic growth for BRICS countries within a multivariate panel framework for 1990–2012. The Pedroni (1999–2004) panel cointegration test shows a long-run relationship among GDP per capita renewable energy consumption, non-renewable energy consumption, and gross fixed capital formation. Finally, we apply panel error correction mechanism which reveals unidirectional causality from economic growth to renewable and non-renewable energy consumption. The results support the conservation hypothesis. In other words, no strong relationship is found between energy consumption to economic growth. These results indicate economic growth is the significant variable which boosts energy consumption in the BRICS countries. Higher the economic growth, higher will be the energy consumption.