Output, renewable energy consumption and international trade: Evidence from a panel of 69 countries

This paper uses panel cointegration techniques to examine the causal relationship between output, renewable energy consumption and international trade for a sample of 69 countries during the period 1980-2007. In the short-run, Granger causality tests show that there is evidence of bidirectional causality relationship between output and trade (exports or imports), and a unidirectional causality relationship running from renewable energy consumption to trade. However, in the short-run, there is evidence of no causality running from trade to renewable energy consumption. In the long-run, the error correction term provides that there is evidence of bidirectional causality relationship between output, trade and renewable energy consumption. Long-run estimations show that all coefficients are positive and statistically significant. Policies recommendations are that, in the long-run, international trade enables countries to benefit from technology transfer and to build the human and physical capacities needed to produce more renewable energies, while increasing their output. Therefore, more trade openness could be a good policy for combating global warming as it incites the use of renewable energies.