The role of energy efficiency in the effect of energy consumption on economic growth: Turkey

Countries use the energy as an essential input to increase their output in the economic growth process. In this respect, countries' energy demand increase in parallel with economic growth, giving rise to increment in economic consumption. However, energy consumption is not the sole factor for sustainable growth, but energy efficiency is also needed. In this context, energy efficiency takes very substantial role in the relation between energy consumption and economic growth and the reasonable level of energy efficiency should be analyzed. In this study, the role of the energy efficiency in the effect of energy consumption on economic growth is examined for Turkey based on province by using the Panel Smooth Transition Regression Model covering the years between 2008 -2014. The results demonstrate that energy efficiency threshold is 6.519%. In this regard, it can be said that energy consumption affects economic growth positively when the energy efficiency is below the threshold and negatively when it is above. As a consequence, in order to have positive effect on economic growth with an increase in energy consumption, politicians have to take this energy efficiency threshold into consideration in energy politics making process.