48A LITERATURE SURVEY ON RELATIONSHIP BETWEEN RENEWABLE ENERGY CONSUMPTION AND ECONOMIC
GROWTH
Jelena Cvijovic1, Tijana Obradovic2, Snezana Knezevic3 *Corresponding author E-mail: vuksanovicjelena1@gmail.com
A R T I C L E I N F O Review Article Received: 06 May 2020 Accepted: 30 June 2020 doi:10.5937/ekoPolj2003991C UDC 655.413:[620.92:330.354 Keywords:
renewable energy consumption, economic growth, GDP, causality, literature survey
JEL: O13, Q42, Q43, Q56
A B S T R A C T
The purpose of this paper is to provide an extensive empirical literature review on the relation between renewable energy consumption and economic growth. The survey included 50 papers, most of which are published in major energy journals, to ensure the high-quality review. This literature review includes period, countries, methodology and research results. Also, the survey included policy recommendation for renewable energy policymakers depending on results obtained by authors. The general observation from reviewed literature is the absence of any clear consensus regarding the relationship between renewable energy and economic growth, which can be contributed to various factors.
© 2020 EA. All rights reserved.
Introduction
The climate change agreement, known as the Paris Agreement, signed in 2016, aims to limit the increase in global average temperature to well below 2°C above pre-industrial levels, increase its ability to adapt to adverse impacts and foster climate resilience and develop low greenhouse gas emissions, in a way that does not compromise food production. In addition, The Paris Agreement requires all Parties to align financial flows with the needs of development accompanied by low greenhouse gas emissions and enhanced climate resilience. At the heart of the Paris Agreement are nationally determined contributions for each signatory country as part of the reduction of greenhouse gas emissions. Each climate plan reflects the Party's ambition to reduce
1 Jelena Cvijovic, MA, PE Belgrade Fortress, Terazije 3/V, 11000 Belgrade, Serbia, Phone: +381 60 08 08 008, E-mail: vuksanovicjelena1@gmail.com, ORCID ID (https://orcid. org/0000-0001-8784-8255)
2 Tijana Obradovic, Ph.D., Assistant Professor, University of Belgrade, Faculty of Organizational Sciences, Jove Ilica 154, 11000 Belgrade, Serbia, Phone: +381 63 493 165, E-mail: tijana. obradovic@fon.bg.ac.rs, ORCID ID (https://orcid.org/0000-0001-9613-318X)
3 Snezana Knezevic, Ph.D., Associate Professor, University of Belgrade, Faculty of Organizational Sciences, Jove Ilica 154, 11000 Belgrade, Serbia, Phone: +381 63 345 230, E-mail: snezana. knezevic@fon.bg.ac.rs, ORCID ID (https://orcid.org/0000-0001-9833-7274)
harmful emissions, taking into account its domestic circumstances and capabilities (UN, 2020). These targets implicitly state that there is a need to move to a low-carbon energy sector, supported by estimates that renewable energy, together with an increase in energy efficiency, can provide a 90% reduction in carbon dioxide emissions by 2050 (IRENA, 2020).
Over the last 10 years, a substantial amount of research has been done on the relationship between renewable energy consumption and economic growth. Many of the papers written on this topic focus on different countries, time periods, and econometric models used in the analysis, and thus the empirical results obtained by the studies reviewed are varied (Dragoi et al., 2018). It is safe to say, given the literature available in the above field, that no definitive conclusion has been reached regarding the causal link between renewable energy and economic growth.
By reviewing the extensive literature on energy and economic growth, four causal hypotheses can be identified: growth hypothesis, conservation hypothesis, feedback hypothesis and neutrality hypothesis (Adewuyi & Awodumi, 2017; Ozturk, 2010; Payne, 2010; Sebri, 2015; Squalli, 2007)
[1] Growth hypothesis suggests that there is one-way causality between energy consumption and economic growth. "In the context of the Granger - causality, the growth hypothesis is supported if an increase in energy consumption causes an increase in real GDP. The policy implications of the growth hypothesis suggest that energy conservation-oriented policies may have detrimental impact on economic growth" (Payne,2010).
[2] Conservation hypothesis is supported if the Granger test confirms one-way causality, that is, if an increase in real GDP causes an increase in energy consumption. This hypothesis suggests that energy savings policies, such as greenhouse gas reduction and energy efficiency enhancement policies, will not have an impact on GDP. "However, it is possible that if a growing economy constrained by political, infrastructural or mismanagement of resources could generate inefficiencies and the reduction in the demand for goods and services, including energy consumption. If such case, an increase in real GDP may have a negative effect on energy consumption" (Payne, 2010)
[3] The feedback hypothesis suggests that energy consumption and economic growth are interdependent and supplementary. In this case, any increase (decrease) in energy consumption results in an increase (decrease) in GDP and vice versa. Therefore, restrictive energy policies will prevent economic growth and in the same way, any increase in GDP will boost energy demand (Ozturk, 2010; Sebri, 2015).
[4] The neutrality hypothesis is supported in case where is no causality between energy consumption and GDP, and therefore neither a conservative energy policy nor an energy expansion policy has any effect on economic growth.
"Neutrality hypothesis views energy consumption as a small component of real GDP and therefore energy consumption should not have a significant impact on economic growth" (Payne, 2010).
The aim of this paper is to provide an overview of the available empirical literature on the causal link between renewable energy consumption and economic growth for the period 2009-2020. Although numerous papers that investigate the relationship between energy and economic growth are available, the authors believe that a literature survey that focuses solely on renewable energy-economic growth nexus is needed. This way the contribute to future research, by collecting and reviewing existing literature in this field, will be given. Also, the contribution of this paper is to provide significant information for renewable energy policymakers based on overview of past research and empirical results.
Materials and methods
For the purpose of this research, 50 papers are selected as a sample, 47 of which are published in journals with Impact Factor (IF) using online databases. The search criteria for the selection included only empirical studies focusing on renewable energy -economic growth, in order to ensure the best review on this subject. The representation of the journals based on the number of selected papers used in this research can be shown in the following chart.
Figure 1. Journal share based on selected papers
■ Renewable and Sustainable Energy Reviwes
■ Energy Economics
■ Energy Policy
■ Renewable Energy
■ Journal of Cleaner Production
■ Others
Source: Authors' calculations From the total of 16 journals included in this research, 81% is with Impact Factor. Articles published in Renewable and Sustainable Energy Reviews comprises 44% of our sample, and also significant share of articles are published in Energy Economics, Energy Policy, Renewable Energy and Journal of Cleaner Production. Articles published in Others section are Ecological Economics, Applied Energy, International Journal of Hydrogen Energy, Energy Reports, Energy Strategy Reviews, Journal of Renewable and Sustainable Energy, Applied Energy, Energy Sources, Part B: Economics, Planning and Policy, Economics Bulletin, Procedia Economics and Finance and International Economics.
Results and discussions
The literature collected for this paper includes 50 papers, most ofwhich have been published in the most renowned energy journals, to provide the highest quality analysis possible. The authors have focused on papers based on empirical research that cover the topic of renewable energy and economic growth. Table 1 presents literature in chronological order on the relationship between renewables and economic growth, including the period in which the survey was conducted, the countries are taken as a sample, the methodology used, and the results of empirical research. By examining Table 1, it can be concluded that the results obtained by the studies presented are mixed. "This lack of consensus can be attributed to the heterogeneity of climate conditions, varying energy consumption patterns, the structure and stages of economic development within a country, alternative econometric methodologies approaches, the presence of omitted variable bias along with the varying time horizons of the studies conducted" (Payne, 2010).
Table 1. Summary of empirical studies on renewable energy consumption-economic
growth nexus
Author(s) Period Country Methodology Causality relationship
1 (Sadorsky, 2009b) 1980-2005 G7 countries Panel cointegration, Fully modified OLS, Dynamic OLS, Seemingly Unrelated regression (SUR) GDP » REC
2 (Sadorsky, 2009a) 1994-2003 18 emerging countries Ordinary least squares (OLS), Fully modified OLS, Dynamic OLS GDP » REC
3 (Bowden & Payne, 2010) 1949-2006 USA Toda-Yamamoto causality test REC + GDP (long run)
4 (Apergis, Payne, Menyah, & Wolde-Rufael, 2010) 1984-2007 19 developed and developing countries Cointegration, Granger causality REC « » GDP (short run)
5 (Apergis & Payne, 2010) 1985-2005 20 OECD countries Panel cointegration test, Granger causality REC « » GDP
6 (Apergis & Payne, 2010) 1992-2007 13 Eurasia countries Panel cointegration test, Granger causality REC « » GDP (long run)
7 (Fang, 2011) 1978-2008 China OLS model REC » GDP
8 (Menegaki, 2011) 1997-2007 27 European countries One-way random effect model, Panel causality test REC + GDP
9 (Apergis & Payne, 2011a) 1990-2007 16 emerging countries Panel cointegration test GDP » REC (short run) REC « » GDP (long run)
Author(s) Period Country Methodology Causality relationship
10 (Apergis & Payne, 2011b) 1980-2006 6 Central American countries Panel cointegration and panel ECM REC « » GDP (long and short run)
11 (Tiwari, 2011) 1960-2009 India Structural VAR approach REC « » GDP
12 (Yildirim, Saraj, & Aslan, 2012) 1949-2010 USA Toda-Yamamoto causality test, Bootsrap-corrected causality test REC » GDP (biomass) REC + GDP
13 (Apergis & Payne, 2012) 1990-2007 80 countries Panel cointegration and panel ECM REC « » GDP (long and short run)
14 (Bildirici & Ozaksoy, 2013) 1960-2010 10 countries ARDL, vector error-correction models GDP » REC (Austria, Turkey) REC » GDP (Hungary, Poland) REC « » GDP (Spain, Sweden, France) REC « » GDP (all countries)
15 (Al-mulali, Fereidouni, Lee, & Sab, 2013) 1980-2009 108 countries FMOLS model REC « » GDP (79% countries) REC + GDP (19% countries) GDP » REC (2% countries)
16 (Ocal & Aslan, 2013) 1990-2010 Turkey ARDL, Toda-Yamamoto causality test GDP » REC (negative)
17 (Magnani & Vaona, 2013) 1997-2007 20 Italian regions Panel error correction REC » GDP
18 (Pao & Fu, 2013) 1980-2010 Brazil ECM-based causality test REC « » GDP (short run) REC + GDP (long run)
19 (Al-mulali, Fereidouni, & Lee, 2014) 1980-2010 18 Latin American countries Pedroni cointegration Test, DOLS, VECM Granger causality REC » GDP (long run) REC « » GDP
Author(s) Period Country Methodology Causality relationship
20 (Sebri & Ben-Salha, 2014) 1971-2010 BRICS countries ARDL, VECM Granger causality REC « » GDP
21 (Lin & Moubarak, 2014) 1977-2011 China ARDL, Johansen cointegration, Granger causality REC « » GDP (long run)
22 (Halkos & Tzeremes, 2014) 1990-2011 36 countries Local linear estimator,Nonparametric analysis REC » GDP (advanced economies)
23 (Azlina, Law, & Nik Mustapha, 2014) 1975-2011 Malaysia Error correction model GDP » REC
24 (Bilgili, 2015) 1981-2013 USA Wavelet analysis REC » GDP
25 (Shahbaz, Loganathan, Zeshan, & Zaman, 2015) 1972Q1-2011Q4 Pakistan ARDL, Rolling widow approach (RWA), VECM Granger causality REC « » GDP
26 (Ibrahiem, 2015) 1980-2011 Egypt ARDL REC « » GDP
REC « » GDP (all countries)
27 (Chang et al., 2015) 1990-2011 G7countries The Emirmahmutoglu and Kose causality methodology. REC + GDP (Canada, Italy, US) GDP » REC (France, UK) REC » GDP (Germany, Japan)
28 (Dogan, 2015) 1990-2012 Turkey ARDL, Johansen cointegration test, Gregory-Hansencointegration test with Structural break REC + GDP (short run) REC » GDP (long run)
29 (Inglesi-Lotz, 2016) 1990-2010 OECD countries Pedroni cointegration test REC » GDP
30 (Destek, 2016) 1971-2011 Newly industrialized countries Asymmetric causality test GDP » REC (South Africa, Turkey, India) REC + GDP (Brazil, Malaysia)
Author(s) Period Country Methodology Causality relationship
31 (Hamit-Haggar, 2016) 1991-2007 11 Sub-Saharan African countries Panel cointegration, OLS, DOLS, FMOLS, DSUR REC » GDP
REC + GDP
32 (Alper & Oguz, 2016) 1990-2009 8 new EU countries Asymmetric causality test, ARDL (Cyprus, Estonia, Hungary, Poland, Slovenia) GDP » REC (Czech Republic) REC » GDP (Bulgaria)
33 (Cherni & Essaber Jouini, 2017) 1990-2015 Tunisia ARDL, Granger causality test REC « » GDP
REC » GDP (Peru)
34 (Destek & Asian, 2017) 1980-2012 17 emerging countries Bootstrap panel causality REC + GDP (12 countries) REC « » GDP (Greece, South Korea)
35 (Ito, 2017) 2002-2011 42 developed countries Generalized method of moments (GMM), pooled mean group (PMG) technique REC » GDP (long run)
36 (Rafindadi & Ozturk, 2017) 1971Q1-2013QIV Germany Clemente-Montanes-Reyesdetrened structural break test, Bayer-Hanck combined cointegration test, ARDL REC « » GDP
37 (Amri, 2017a) 1990-2012 72 countries Dynamic-simultaneous equation panel data approach REC « » GDP (all countries, developing, developed countries)
38 (Kahia, Aïssa, & Lanouar, 2017) 1980-2012 11 MENA Net Oil Importing Countries (NOICs) Panel error correction model REC « » GDP REC » GDP
39 (Furuoka, 2017) 1992-2011 Baltic countries Panel cointegration test, panel causality test. GDP » REC
Author(s) Period Country Methodology Causality relationship
40 (Brini, Amara, & Jemmali, 2017) 1980-2011 Tunisia ARDL, Granger causality test GDP » REC (negative)
41 (Amri, 2017b) 1980-2012 Algeria ARDL REC » GDP
REC » GDP (Bulgaria, Greece,
42 (Kojak & §arkgüne§i, 2017) 1990-2012 9 Black Sea and Balkan countries Heterogeneous panel causality Macedonia, Russia, Ukraine) REC « » GDP (Albania, Georgia, Romania) REC + GDP (Turkey)
43 (Saad & Taleb, 2017) 1990-2014 12 European Union countries Granger causality, Panel vector error correction model GDP » REC (long run) REC « » GDP (short run)
REC » GDP (4 provinces)
44 (Bao & Xu, 2019) 1997-2015 30 provinces and 7 geographical regions Bootstrap panel causality test GDP » REC (9 provinces, 4 geographical regions) REC « » GDP (1 province)
45 (Zafar, Shahbaz, Hou, & Sinha, 2019) 1990-2015 APEC countries Westerlund cointegration test,Continuously Updated Fully Modified Ordinary Least Square (CUPFM) REC « » GDP
46 (Aydin, 2019) 1980-2015 26 OECD countries Dumitrescu-Hurlin panel causality test, Croux and Reusens frequency domain causality test REC « » GDP
47 (Maji, Sulaiman, & Abdul-Rahim, 2019) 1995-2014 15 West African countries Panel dynamic ordinary least squares (DOLS) REC » GDP negative
Author(s) Period Country Methodology Causality relationship
48 (Ozcan & Ozturk, 2019) 1990-2016 17 emerging countries Bootstrap panel causality test REC + GDP (16 countries) REC » GDP (Poland)
49 (Alvarado et al., 2019) 1972-2014 19 countries of Latin America Pedroni and Westerlund cointegration techniques, Dumitrescu and Hurlin causality test REC « » GDP
50. (Rahman & Velayutham, 2020) 1990-2014 5 South Asian countries Pedroni and Kao tests, FMOLS and DOLS estimation techniques, Dumitrescue-Hurlin GDP » REC
Source: Authors
Notes: REC » GDP, GDP » REC, REC « » GDP, REC + GDP indicates growth, conservation, feedback and neutrality hypothesis respectively.
The selected literature can be divided on the basis of the empirical results obtained, i.e. the causal link between renewable energy sources and economic growth. The majority of papers reviewed confirm the relationship between renewable energy consumption and economic growth, only the direction of the relationship is different, while fewer studies confirm the neutrality hypothesis, indicating that there is no relationship between the two variables.
Figure 2. Hypothesis for renewable energy-economic growth nexus (in %)
■ Growth ■ Conservation ■ Neutrality Feedback
Source: Authors' calculations
Taking into account the collected literature presented in Table 1, it can be said that in the past 10 years, research related to renewable energy and economic growth has been dominated by multi-country (68%) over single-country (32%) studies, which is consistent with previous literature reviews (Adewuyi & Awodumi, 2017).
Figure 3. Multi-country vs single-country studies (in %)
■ Single-country
■ Multi-country
Source: Authors' calculations
Based on our review of selected literature, 86% of reviewed studies have confirmed the need to enhance investments in renewable energy sources. The authors also suggested the introduction of adequate policies that would encourage the development of renewable sources.
Review of literature supporting growth hypothesis
Fang was among the first to test the impact of electricity consumption from renewable sources on China's economic well-being for the period 1978-2008. Using multivariate Ordinary Least Squared (OLS) results were obtained that confirm the growth hypothesis, that is, "1% increase in consumption from renewable sources increases GDP by 0.12%" (Fang, 2011). Amri also researched the causal link between renewable energy and economic growth for an individual country. The Autoregressive Distributed Lag (ARDL) test shows that there is a unidirectional relationship in Algeria that goes from renewable sources to GDP in the long run. Policymakers should enhance investments in renewable energy (Amri, 2017b). Bilgili used wavelet coherence and wavelet partial coherence analyses to test the relationship between renewable energy and economic growth, for the period 1981-2013. The author obtained empirical results showing that consumption from renewable sources has a considerable effect on industrial production and hence on economic growth (Bilgili, 2015).
One of the multi-country studies was done by a group of authors for 18 Latin American countries for the period 1980-2010. Using the panel Dynamic Ordinary Least Squares (DOLS) and the Vector Error-Correction (VEC) Granger causality model they obtained results that show that the consumption of energy from renewable sources has a significant effect on economic growth compared to the consumption from non-renewable sources. Looking at the results of this study, the advice to the analyzed countries would be to increase investments in renewable energy sources in order to increase the share of electricity from renewable sources (Al-mulali et al., 2014). Using the Pedroni cointegration test, Inglesi-Lotz conducted a study for 34 OECD countries in 1990-2010, with estimates as follows: "an increase of 1% of renewable energy consumption will increase GDP by 0.105% and GDP per capita by 0,1%, while increasing the share of renewable energy in the energy mix of countries will increase GDP by 0.089% and GDP
per capita by 0.09%"(Inglesi-Lotz, 2016). The policy recommendation is promoting consumption from renewable energy. Ito explored the link between carbon dioxide emissions, renewable, and non-renewable sources of consumption and economic growth for 42 developed countries. Research has shown that renewable energy sources make a positive contribution to long-term economic growth. Such results suggest that developing countries should invest in the development of the renewable energy sector. In this way, they increase energy autonomy and create sustainable economic growth as well as employment. However, for developing countries in order to achieve these goals, it is essential that these countries receive financial and technological assistance from developed countries (Ito, 2017). Similar results were obtained by Magnani and Vaona, who worked to measure the effects of renewable energy production on 20 Italian regions. Using various econometric methods, the authors have shown that energy production encourages economic growth, and policies promoting the use of renewable energy sources should be adopted (Magnani & Vaona, 2013). A group of authors investigated the impact of renewable energy on economic growth in 15 West African countries using the panel ordinary dynamic least squares (DOLS) from 19952014. The results showed that there is a negative impact, that is, renewable energy consumption is slowing economic growth in these countries (Maji et al., 2019).
Review of literature supporting conservation hypothesis
The first author to address the topic of renewables and economic growth was Sadorsky, and he has confirmed the conservation hypothesis in his two papers, for emerging countries and the G7 countries. Although the observation period is different, both studies have shown that an increase in GDP per capita is a major driver of renewable energy consumption (Sadorsky, 2009a, 2009b). Furuoka explored the relationship between electricity consumption from renewable sources and economic growth for the Baltic countries in 1992-2011. Statistical analysis obtained empirical results in favor of the conservation hypothesis for all observed three countries - Estonia, Latvia and Lithuania. The results thus obtained suggest that the Baltic countries' governments are free to implement conservation policies without impeding economic development (Furuoka, 2017). Rahman and Velayutham also researched a group of South Asian countries and came up with similar results for all 5 countries observed. Conservation hypothesis has been confirmed, and the authors believe that energy policies should be designed in a way that supports and promotes increased use of energy from renewable sources (Rahman & Velayutham, 2020). Some single-country studies also support conservation hypothesis. Ocal and Aslan did research for Turkey, Azlina, Law and Mustapha for Malaysia, and Brini, Amara and Jemmali for Tunisia, and in all three cases empirical results confirmed conservation hypothesis. However, in developing countries, there is a possibility that economic growth may be adversely affected by the impact of renewables, precisely because of large and expensive investments. This claim is supported by the empirical results obtained for Tunisia and Turkey, which confirmed the negative effect on economic growth coming from renewable energy consumption (Azlina et al., 2014; Brini et al., 2017; Ocal & Aslan, 2013).
Review of literature supporting feedback hypothesis
Aperagis and Payne tested the causal relationship between renewable energy consumption and economic growth on several occasions. They chose a panel of 20 OECD countries,13 Eurasia countries, 6 Central American countries, and 80 countries in four different papers. These studies examine the renewable consumption-economic growth nexus over a different period of time, nevertheless, feedback hypothesis was confirmed for all the above (Apergis & Payne, 2010, 2011b, 2012). Investigating the causal relationship between economic growth and renewable energy consumption in BRIC countries for the period 1971-2010, Sebri and Ben-Salhagot obtained the results that support the feedback hypothesis. "The empirical evidence from the ARDL approach indicates that renewable energy consumption has a positive effect on economic growth and vice versa" (Sebri & Ben-Salha, 2014). Group of authors investigated renewable energy consumption effects on economic growth using the Westerlund cointegration test in the period 1990-2015 for Asia-Pacific Economic Cooperation (APEC) countries. "This empirical evidence suggests that countries should increase investment in renewable energy sectors and plan for development in renewable energy for sustainable energy growth" (Zafar et al., 2019). Aydin explored the relationship between renewable and non-renewable electricity consumption and economic growth using two different panel causality approaches in order to make a comparison. Results for 26 OECD countries, confirmed the feedback hypothesis, so the author indicates that "policy-makers should promote renewable electricity consumption to ensure energy security, reduce energy dependence, and encourage economic growth" (Aydin, 2019).
Pao and Fu used Brazil yearly statistics for the period 1980-2010 to examine the causal relationship between GDP and four types of energy consumption. Authors used vector error correction models and revealed the following: "A unidirectional causality from non-hydroelectric renewable energy consumption to economic growth and bi-directional causality between economic growth and total renewable energy consumption" (Pao & Fu, 2013). Results from this study suggest that economic growth plays an important role in renewable sector development. On the other hand, the expansion of renewable projects can enhance Brazil's economic growth. That being said, policymakers should include incentive mechanisms in their strategies for renewable energy development. (Pao & Fu, 2013). Lin and Moubarak explored renewable consumption and economic growth nexus in China using ARDL approach and Johansen cointegration techniques. The results showed bidirectional causality between variables, which implies that the growing economy in China is favorable for the development of the renewable energy sector, and at the same time, renewable consumption helps to boost economic growth (Lin & Moubarak, 2014). Group of authors used ARDL and a rolling window approach to investigate economic growth and renewable energy consumption in Pakistan. The study results detected a feedback effect between these variables (Shahbaz et al., 2015). Ibraheim also got similar results for Egypt, where the result confirmed the feedback hypothesis. The author suggests investments as well as a clear and comprehensive strategy for renewable energy development (Ibrahiem, 2015).
Review of literature supporting neutrality hypothesis
Bowden and Pyne used Toda-Yamamoto long-run causality test to explore the relationship between renewable energy consumption by sector and economic growth in the USA. For the period of 1949-2006, they found "the absence of Granger-causality between commercial and industrial renewable energy consumption and real GDP, respectively" (Bowden & Payne, 2010). The group of authors found similar results for the USA in the period 1949-2010. They explored the relationship between GDP and different kinds of renewable energy by applying a Toda-Yamamoto procedure and bootstrap-corrected causality test. Only one causality was found biomass-waste-derived energy consumption to real GDP, while for total renewable energy consumption and other kinds of renewable energy, the neutrality hypothesis was confirmed (Yildirim et al., 2012). Menegaki investigated the causal relationship between renewable energy and economic growth for 27 European countries in a multivariate panel framework over the period 1997-2007 using a random effect model. Empirical results support the neutrality hypothesis which implicates that renewable energy consumption has no effect on economic growth in Europe (Menegaki, 2011). Dogan also investigated electricity consumption from renewable energy and economic growth in Turkey and found the evidence of neutrality hypothesis. Since the author found that only consumption from non-renewable sources stimulate GRP growth, a suggestion for Turkish government is a reduction of electricity share from renewable sources (Dogan, 2015).
Review of literature with mixed results across counties
In this section, the findings of multi-country studies on the causal relationship between renewable energy consumption and economic growth relationship are summarized. The results are mixed across different countries therefore it cannot be argued that either of these studies supports a certain hypothesis. Bildirici and Ozaksoy investigated the causality between biomass energy consumption and economic growth in 10 European countries by using the Autoregressive Distributed Lag bounds testing approach and vector error-correction models. The results support the conservation hypothesis for Austria and Turkey and growth hypothesis for Hungary and Poland. Bidirectional causality was found for Spain, Sweden, and France (Bildirici & Ozaksoy, 2013). Group of authors investigated the bi-directional long-run relationship between renewable energy consumption and GDP growth in countries with different income. "The results revealed that 79% of the countries have a positive bi-directional long-run relationship between renewable energy consumption and GDP growth. On the other hand, 19% of the countries showed no longrun relationship between the variables, while 2% of the countries showed a one-way longrun relationship from GDP growth to renewable energy consumption, and from renewable energy consumption and GDP growth" (Al-mulali et al., 2013). Although results vary across countries, it is found that the higher the income countries are, the bi-directional relationship is significant Group of authors investigated if there is a causal relationship between renewable energy consumption and economic growth in G7 countries, for the period 1990-2011. "The empirical results support the existence of a bi-directional causal
relationship for overall panel. However, looking at the individual results for each country, the neutrality hypothesis is confirmed for Canada, Italy and the US; while for France and UK there is unidirectional causality from GDP to renewable energy, and the opposite for Germany and Japan" (Chang et al., 2015). Ko?ak and §arkgune§i explored renewable energy and economic growth nexus in the Black Sea and Balkan countries for the period of 19902012. The research has shown the following: ".. .there is a long term balance relationship between renewable energy consumption and economic growth and renewable energy consumption has a positive impact on economic growth. Heterogeneous panel causality analysis results support growth hypothesis in Bulgaria, Greece, Macedonia, Russia and Ukraine; feedback hypothesis in Albania, Georgia and Romania; neutrality hypothesis in Turkey and according to the panel data set including all nine countries the results support feedback hypothesis" (Ko?ak & §arkgune§i, 2017). Authors are of the opinion that policies promoting renewable energy consumption should be supported in Black sea and Balkan. Bao and Xu investigated the linkage between renewable energy consumption and economic growth in China's provinces and regions. For the purposes ofthis paper section, we consider that this study is a multi-country study, although it is based on one county. The study results show no causality in 53% of provinces and 43% of geographical regions for the nexus of renewable energy consumption and economic growth (Bao & Xu, 2019). Alper and Oguz investigated the causality between economic growth and renewable energy in 8 new EU countries and they found mixed results across countries. The empirical results "support the neutrality hypothesis for Cyprus, Estonia, Hungary, Poland, Slovenia, conservation for Czech Republic and growth for Bulgaria" (Alper & Oguz, 2016). Destek and Aslan also investigated renewable energy - economic growth nexus for a group of emerging counties for the period 1980-2012. The results showed no causality for 12 countries, growth effect is found for Peru, conservation effect for Colombia and Thailand and feedback effect for Greece and South Korea (Destek & Aslan, 2017).
Conclusions
This survey provides a review of empirical literature related to the causal relationship between renewable energy consumption and economic growth. Understanding the causal link between renewable energy consumption and economic growth plays an important role in defining renewable energy policies. The goal was to consolidate the results found by various authors and thus propose some ideas for renewable energy policymakers. Also, a path for future researchers in this field is made, since this paper is the only one that deals exclusively with renewable energy consumption-economic growth nexus. Based on the literature reviewed, the findings from various studies are at least contradictory. While some authors found causal relationship running from renewable energy to economic growth and vice versa, from economic growth to renewable energy, there are others that found no causal relationship. As mentioned earlier, a possible reason for these inconsistent results hides in selected countries, periods of time and econometric techniques used in studies. However, based on the research which includes 50 papers, only 16% of total results supports neutrality hypothesis, which means that
causality between renewable energy consumption and economic growth was found in most of the studies.
Based on findings of this article, it can be argued that in most cases, energy policies should be oriented towards the expansion of energy use from renewable sources. The need for renewable energy expansion can be viewed from two different angles. Promoting and investing in renewable energy projects can lead to the fulfillment of Sustainable Development Goals, in order to fight against climate change. Furthermore, increased consumption from renewable sources can help countries who are dependent on energy import to reduce their expenses and what is more important, to become self-reliant.
On the other hand, the importance of investing in renewable energy can be justified by their positive effect on economic growth. In the majority of studies, reviewed for the purpose of this literature survey, consumption from renewable energy can lead to an increase in economic growth. That being said, in general, energy policies should promote renewable energy development, except in cases where a negative impact on economic growth was found. In those cases, a possible solution is to find an adequate ratio of renewables and non-renewables.
Conflict of interests
The authors declare no conflict of interest.
References
1. Adewuyi, A.O., & Awodumi, O.B. (2017). Renewable and non-renewable energy-growth-emissions linkages: Review of emerging trends with policy implications.
Renewable and Sustainable Energy Reviews, 69, 275-291. doi: http://dx.doi. org/10.1016/j.rser.2016.11.178
2. Al-mulali, U., Fereidouni, H.G., Lee, J.Y., & Sab, C. (2013). Examining the bidirectional long run relationship between renewable energy consumption and GDP growth. Renewable and Sustainable Energy Reviews, 22, 209-222. doi: http:// dx.doi.org/10.1016/j.rser.2013.02.005
3. Al-mulali, U., Fereidouni, H.G., & Lee, J.Y.M. (2014). Electricity consumption from renewable and non-renewable sources and economic growth: Evidence from Latin American countries. Renewable and Sustainable Energy Reviews, 30, 290298. doi: http://dx.doi.org/10.1016/j.rser.2013.10.006
4. Alper, A., & Oguz, O. (2016). The role of renewable energy consumption in economic growth: Evidence from asymmetric causality. Renewable and Sustainable Energy Reviews, 60, 953-959. doi: http://dx.doi.org/10.1016/j.rser.2016.01.123
5. Alvarado, R., Ponce, P., Alvarado, R., Ponce, K., Huachizaca, V., & Toledo, E. (2019). Sustainable and non-sustainable energy and output in Latin America: A cointegration and causality approach with panel data. Energy Strategy Reviews, 26, 100-369. doi: http://dx.doi.org/10.1016/j.esr.2019.100369
6. Amri, F. (2017a). Intercourse across economic growth, trade and renewable energy consumption in developing and developed countries. Renewable and Sustainable Energy Reviews, 69, 527-534. doi: http://dx.doi.org/doi:10.1016/j.rser.2016.11.230
7. Amri, F. (2017b). The relationship amongst energy consumption (renewable and non-renewable), and GDP in Algeria. Renewable and Sustainable Energy Reviews, 76, 62-71. doi: http://dx.doi.org/10.1016Zj.rser.2017.03.029
8. Apergis, N., & Payne, J.E. (2010). Renewable energy consumption and growth in Eurasia. Energy Economics, 32(6), 1392-1397. doi: http://dx.doi.org/10.1016/j. eneco.2010.06.001
9. Apergis, N., & Payne, J.E. (2011a). Renewable and non-renewable electricity consumption-growth nexus: Evidence from emerging market economies. Applied Energy, 88(12), 5226-5230. doi: http://dx.doi.org/10.1016/j.apenergy.2011.06.041
10. Apergis, N., & Payne, J.E. (2011b). The renewable energy consumption-growth nexus in Central America. Applied Energy, 88(1), 343-347. doi: http://dx.doi. org/10.1016/j.apenergy.2010.07.013
11. Apergis, N., & Payne, J.E. (2012). Renewable and non-renewable energy consumption-growth nexus: Evidence from a panel error correction model. Energy Economics, 34(3), 733-738. doi: http://dx.doi.org/10.1016/j.eneco.2011.04.007
12. Apergis, N., Payne, J.E., Menyah, K., & Wolde-Rufael, Y. (2010). On the causal dynamics between emissions, nuclear energy, renewable energy, and economic growth. Ecological Economics, 69(11), 2255-2260. doi: http://dx.doi.org/10.1016/j. ecolecon.2010.06.014
13. Aydin, M. (2019). Renewable and non-renewable electricity consumption-economic growth nexus: Evidence from OECD countries. Renewable Energy, 136, 599-606. doi: http://dx.doi.org/10.1016/j.renene.2019.01.008
14. Azlina, A.A., Law, S.H., & Nik Mustapha, N.H. (2014). Dynamic linkages among transport energy consumption, income and CO2 emission in Malaysia. Energy Policy, 73, 598-606. doi: http://dx.doi.org/10.1016/j.enpol.2014.05.046
15. Bao, C., & Xu, M. (2019). Cause and effect of renewable energy consumption on urbanization and economic growth in China's provinces and regions. Journal of Cleaner Production, 231, 483-493. doi: http://dx.doi.org/10.1016/j. jclepro.2019.05.191
16. Bildirici, M.E., & Ozaksoy, F. (2013). The relationship between economic growth and biomass energy consumption in some European countries. Journal of Renewable and Sustainable Energy, 5(2), 023141. doi: http://dx.doi.org/10.1063/L4802944
17. Bilgili, F. (2015). Business cycle co-movements between renewables consumption and industrial production: A continuous wavelet coherence approach. Renewable and Sustainable Energy Reviews, 52, 325-332. doi: http://dx.doi.org/10.1016/j. rser.2015.07.116
18. Bowden, N., & Payne, J.E. (2010). Sectoral Analysis of the Causal Relationship Between Renewable and Non-Renewable Energy Consumption and Real Output in the US. Energy Sources, Part B: Economics, Planning, and Policy, 5(4), 400-408. doi: http://dx.doi.org/10.1080/15567240802534250
19. Brini, R., Amara, M., & Jemmali, H. (2017). Renewable energy consumption, International trade, oil price and economic growth inter-linkages: The case of Tunisia. Renewable and Sustainable Energy Reviews, 76, 620-627. doi: http:// dx.doi.org/10.1016/j.rser.2017.03.067
20. Chang, T., Gupta, R., Inglesi-Lotz, R., Simo-Kengne, B., Smithers, D., & Trembling, A. (2015). Renewable energy and growth: Evidence from heterogeneous panel of G7 countries using Granger causality. Renewable and Sustainable Energy Reviews, 52, 1405-1412. doi: http://dx.doi.org/10.1016Zj.rser.2015.08.022
21. Cherni, A., & Essaber Jouini, S. (2017). An ARDL approach to the CO2 emissions, renewable energy and economic growth nexus: Tunisian evidence. International Journal of Hydrogen Energy, 42(48), 29056-29066. doi: http://dx.doi.org/10.1016/j. ijhydene.2017.08.072
22. Destek, M.A. (2016). Renewable energy consumption and economic growth in newly industrialized countries: Evidence from asymmetric causality test. Renewable Energy, 95, 478-484. doi: http://dx.doi.org/10.1016/j.renene.2016.04.049
23. Destek, M.A., & Aslan, A. (2017). Renewable and non-renewable energy consumption and economic growth in emerging economies: Evidence from bootstrap panel causality. Renewable Energy, 111, 757-763. doi: http://dx.doi. org/10.1016/j.renene.2017.05.008
24. Dogan, E. (2015). The relationship between economic growth and electricity consumption from renewable and non-renewable sources: A study of Turkey.
Renewable and Sustainable Energy Reviews, 52, 534-546. doi: http://dx.doi. org/10.1016/j.rser.2015.07.130
25. Drägoi, M. C., Andrei, J. V., Mieilä, M., Panait, M., Dobrotä, C. E., & Lädaru, R. G. (2018). Food safety and security in Romania-an econometric analysis in the context of national agricultural paradigm transformation. Amfiteatru Economic, 20(47), 134-150. doi: http://dx.doi.org/10.24818/EA/2018/47/134
26. Fang, Y. (2011). Economic welfare impacts from renewable energy consumption: The China experience. Renewable and Sustainable Energy Reviews, 15(9), 51205128. doi: http://dx.doi.org/10.1016/j.rser.2011.07.044
27. Furuoka, F. (2017). Renewable electricity consumption and economic development: New findings from the Baltic countries. Renewable and Sustainable Energy Reviews, 71, 450-463. doi: http://dx.doi.org/10.1016/j.rser.2016.12.074
28. Halkos, G.E., & Tzeremes, N.G. (2014). The effect of electricity consumption from renewable sources on countries' economic growth levels: Evidence from advanced, emerging and developing economies. Renewable and Sustainable Energy Reviews, 39, 166-173. doi: http://dx.doi.org/10.1016/j.rser.2014.07.082
29. Hamit-Haggar, M. (2016). Clean energy-growth nexus in sub-Saharan Africa: Evidence from cross-sectionally dependent heterogeneous panel with structural breaks. Renewable and Sustainable Energy Reviews, 57, 1237-1244. doi: http:// dx.doi.org/10.1016/j.rser.2015.12.161
30. Ibrahiem, D.M. (2015). Renewable Electricity Consumption, Foreign Direct Investment and Economic Growth in Egypt: An ARDL Approach. Procedia Economics and Finance, 30, 313-323. doi: http://dx.doi.org/10.1016/s2212-5671(15)01299-x
31. Inglesi-Lotz, R. (2016). The impact of renewable energy consumption to economic growth: A panel data application. Energy Economics, 53, 58-63. doi: http://dx.doi. org/10.1016/j.eneco.2015.01.003
32. International Renewable Energy Agency (IRENA), Retrieved from https://www. irena.org/climatechange (February 10 2020).
33. Ito, K. (2017). CO2 emissions, renewable and non-renewable energy consumption, and economic growth: Evidence from panel data for developing countries. International Economics, 151, 1-6. doi: http://dx.doi.org/10.1016lj. inteco.2017.02.001
34. Kahia, M., Ai'ssa, M.S.B., & Lanouar, C. (2017). Renewable and non-renewable energy use - economic growth nexus: The case of MENA Net Oil Importing Countries. Renewable and Sustainable Energy Reviews, 71, 127-140. doi: http:// dx.doi.org/10.1016/j.rser.2017.01.010
35. Ko?ak, E., & §arkgüne§i, A. (2017). The renewable energy and economic growth nexus in Black Sea and Balkan countries. Energy Policy, 100, 51-57. doi: http:// dx.doi.org/10.1016/j.enpol.2016.10.007
36. Lin, B., & Moubarak, M. (2014). Renewable energy consumption - Economic growth nexus for China. Renewable and Sustainable Energy Reviews, 40, 111-117. doi: http://dx.doi.org/10.1016Zj.rser.2014.07.128
37. Magnani, N., & Vaona, A. (2013). Regional spillover effects of renewable energy generation in Italy. Energy Policy, 56, 663-671. doi: http://dx.doi.org/10.1016/j. enpol.2013.01.032
38. Maji, I.K., Sulaiman, C., & Abdul-Rahim, A.S. (2019). Renewable energy consumption and economic growth nexus: A fresh evidence from West Africa. Energy Reports, 5, 384-392. doi: http://dx.doi.org/10.1016Zj.egyr.2019.03.005
39. Menegaki, A.N. (2011). Growth and renewable energy in Europe: A random effect model with evidence for neutrality hypothesis. Energy Economics, 33(2), 257-263. doi: http://dx.doi.org/10.1016/j.eneco.2010.10.004
40. Ocal, O., & Aslan, A. (2013). Renewable energy consumption-economic growth nexus in Turkey. Renewable and Sustainable Energy Reviews, 28, 494-499. doi: http://dx.doi.org/10.1016/j.rser.2013.08.036
41. Ozcan, B., & Ozturk, I. (2019). Renewable energy consumption-economic growth nexus in emerging countries: A bootstrap panel causality test. Renewable and Sustainable Energy Reviews, 104, 30-37. doi: http://dx.doi.org/10.1016/j. rser.2019.01.020
42. Ozturk, I. (2010). A literature survey on energy-growth nexus. Energy Policy, 35(1), 340-349. doi: http://dx.doi.org/10.1016/j.enpol.2009.09.024
43. Pao, H.T., & Fu, H.C. (2013). Renewable energy, non-renewable energy and economic growth in Brazil. Renewable and Sustainable Energy Reviews, 25, 381392. doi: http://dx.doi.org/10.1016/j.rser.2013.05.004
44. Payne, J.E. (2010). Survey of the international evidence on the causal relationship between energy consumption and growth. Journal of Economic Studies, 37(1), 5395. doi: http://dx.doi.org/10.1108/01443581011012261
45. Rafindadi, A.A., & Ozturk, I. (2017). Impacts of renewable energy consumption on the German economic growth: Evidence from combined cointegration test.
Renewable and Sustainable Energy Reviews, 75, 1130-1141. doi: http://dx.doi. org/10.1016/j.rser.2016.11.093
46. Rahman, M.M., & Velayutham, E. (2020). Renewable and non-renewable energy consumption-economic growth nexus: New evidence from South Asia. Renewable Energy, 147, 399-408. doi: http://dx.doi.org/10.1016/j.renene.2019.09.007
47. Saad, W., & Taleb, A. (2017). The causal relationship between renewable energy consumption and economic growth: evidence from Europe. Clean Technologies and Environmental Policy, 20(1), 127-136. doi: http://dx.doi.org/10.1007/s10098-017-1463-5
48. Sadorsky, P. (2009a). Renewable energy consumption and income in emerging economies. Energy Policy, 37(10), 4021-4028. doi: http://dx.doi.org/10.1016/j. enpol.2009.05.003
49. Sadorsky, P. (2009b). Renewable energy consumption, CO2 emissions and oil prices in the G7 countries. Energy Economics, 31(3), 456-462. doi: http://dx.doi. org/10.1016/j.eneco.2008.12.010
50. Sebri, M. (2015). Use renewables to be cleaner: Meta-analysis of the renewable energy consumption-economic growth nexus. Renewable and Sustainable Energy Reviews, 42, 657-665. doi: http://dx.doi.org/10.1016/j.rser.2014.10.042
51. Sebri, M., & Ben-Salha, O. (2014). On the causal dynamics between economic growth, renewable energy consumption, CO 2 emissions and trade openness: Fresh evidence from BRICS countries. Renewable and Sustainable Energy Reviews, 39, 14-23. doi: http://dx.doi.org/10.1016/j.rser.2014.07.033
52. Shahbaz, M., Loganathan, N., Zeshan, M., & Zaman, K. (2015). Does renewable energy consumption add in economic growth? An application of auto-regressive distributed lag model in Pakistan. Renewable and Sustainable Energy Reviews, 44, 576-585. doi: http://dx.doi.org/10.1016/j.rser.2015.01.017
53. Squalli, J. (2007). Electricity consumption and economic growth: Bounds and causality analyses of OPEC members. Energy Economics, 29(6), 1192-1205. doi: http://dx.doi.org/10.1016/j.eneco.2006.10.001
54. The United Nations, Retrieved from https://www.un.org/en/sections/issues-depth/ climate-change/ (February 10 2020).
55. Tiwari, A. (2011). A structural VAR analysis of renewable energy consumption, real GDP and CO2 emissions: Evidence from India. Economics Bulletin, 31(2), 1793-1806.
56. Yildirim, E., Sara?, §., & Aslan, A. (2012). Energy consumption and economic growth in the USA: Evidence from renewable energy. Renewable and Sustainable Energy Reviews, 16(9), 6770-6774. doi: http://dx.doi.org/10.1016/j.rser.2012.09.004
57. Zafar, M.W., Shahbaz, M., Hou, F., & Sinha, A. (2019). From nonrenewable to renewable energy and its impact on economic growth: The role of research & development expenditures in Asia-Pacific Economic Cooperation countries. Journal of Cleaner Production, 212, 1166-1178. doi: http://dx.doi.org/10.1016/j. jclepro.2018.12.081
