Causality between economic growth, electrical energy consumption and carbon emission: An analysis on choosen EU countries

It is known that electric energy is the type of energy that contributes most to economic growth among all other energy types. For sustainable economic growth, there must be an electricity production to supply the demand for electricity. Electrical energy, as a secondary energy source, is produced by using primary energy sources. This means that there will be an extra and faster carbon emission by adding to the existing emissions that are come off for some other reasons. Preferring renewable energy in electricity generation avoids this negative situation. In this study; this causality relationship between economic growth, consumption of electricity and carbon emissions has been examined for the European Union that has foreign-dependency in primary energy sources and known for its ambitious attitude towards carbon emissions by selecting the period 1995-2014. Panel data analysis was used in this study. For panel data analysis, respectively; unit root tests, cointegration test and Dumitrescu-Hurlin panel causality test were used. According to the results; there is a one-way causality relationship was determined from economic growth to carbon emissions, from electricity consumption to carbon emissions and from economic growth to electricity consumption. This proves mathematically that the European Union still uses traditional methods of electricity generation intensely despite its foreign-dependency on primary energy and this behaviour shows the inconsistency in its attitude towards carbon emission. Keywords: Economic Growth, Renewable Energy, Eletricity, Carbon Emissions, Panel Data Analysis, Dumitrescu-Hurlin Panel Causality Tests