The causal relationship between renewable energy consumption and economic growth: Evidence from the G7 countries

This paper examines the causal relationship between renewable energy consumption and economic growth for the G7 countries using annual data from 1990 to 2011. We implement a bootstrap panel causality procedure which allows us to circumvent the data limitation while accounting for the heterogeneity and cross sectional dependency issues that arise in panel data analysis. Empirical results provide evidence of a bidirectional causality between economic growth and renewable energy; suggesting that renewable energy expansion might help improve the economic performance of the G7 countries. Conversely, individual country results support a unidirectional causality running from economic growth to renewable energy for France and the UK; the reverse causality for Japan and no causality in any direction between the two variables for the remaining countries.