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Energies 2017, 10(3), 381; doi:10.3390/en10030381

Does Renewable Energy Drive Sustainable Economic Growth? Multivariate Panel Data Evidence for EU-28 Countries

Department of Finance, The Bucharest University of Economic Studies, 6 Piata Romana, 010374 Bucharest, Romania
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Academic Editor: Ignacio de los Ríos Carmenado
Received: 24 February 2017 / Revised: 10 March 2017 / Accepted: 13 March 2017 / Published: 17 March 2017
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Abstract

Energy is crucial to economic progress, but the contemporary worldwide population increase that demands greater energy generated from conventional exhaustible resources, an energy price upsurge, and environmental concerns, imperils sustainable economic growth. Nevertheless, switching to renewable energy produced from naturally replenished resources promotes energy security, likewise addressing issues such as global warming and climate change. This paper aims at exploring the influence and causal relation between renewable energy, both overall and by type, and sustainable economic growth of European Union (EU)-28 countries for the period of 2003–2014. We notice that the mean share of renewable energy in the gross final energy consumption is 15%, while the mean share of renewable energy in transport fuel consumption is 3%, which are below the thresholds of 20% and 10%, respectively, as set by the EU Directive 2009/28/EC. By estimating panel data fixed-effects regression models, the results provide support for a positive influence of renewable energy overall, as well as by type, namely biomass, hydropower, geothermal energy, wind power, and solar energy on gross domestic product per capita. However, biomass energy shows the highest influence on economic growth among the rest of renewable energy types. In fact, a 1% increase of the primary production of solid biofuels increases GDP per capita by 0.16%. Besides, cointegrating regressions set on panel fully modified and dynamic ordinary least squares regressions confirm the positive influence related to the primary production of renewable energies on economic growth. A 1% increase in primary production of renewable energies increases GDP per capita by 0.05%–0.06%. However, the results of Granger causality based on panel vector error correction model indicate both in short-run and long-run a unidirectional causal relationship running from sustainable economic growth to the primary production of renewable energies, being supported the conservation hypothesis. View Full-Text
Keywords: renewable energy; sustainable economic growth; fixed-effects regression; cointegration; panel vector error correction model; Granger causality renewable energy; sustainable economic growth; fixed-effects regression; cointegration; panel vector error correction model; Granger causality
This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. (CC BY 4.0).

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MDPI and ACS Style

Armeanu, D.Ş.; Vintilă, G.; Gherghina, Ş.C. Does Renewable Energy Drive Sustainable Economic Growth? Multivariate Panel Data Evidence for EU-28 Countries. Energies 2017, 10, 381.

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