The relationship between renewable energy consumption and growth in energy importing countries: Evidence from the OECD

The increasing global population and accelerating economic growth have intensified energy demand, leading to greater energy imports and dependence in countries with insufficient fossil fuel resources. The potential adverse effects of energy imports on economic growth have further highlighted the significance of the energy factor and accelerated the shift toward renewable energy sources. In this context, the transition to domestically available renewable energy resources in fossil fuel importing countries stands out as a means to enhance energy supply security and contribute to sustainable development, particularly due to the cleaner nature of renewables compared to fossil fuels. Owing to these potential benefits, a substantial body of literature has examined the relationship between economic growth and energy consumption, including both fossil and renewable sources. However, in energy importing countries, the relationship between renewable energy consumption and economic growth warrants particular attention, given its potential to mitigate trade deficits and other economic challenges arising from fossil energy imports. Accordingly, this study aims to analyze the causal relationship between renewable energy consumption and economic growth in energy importing OECD countries, thereby offering an original contribution to the literature. To this end, the relationship between renewable energy consumption and economic growth is investigated for OECD countries that are net energy importers. The study utilizes a thirty year dataset covering the period from 1990 to 2020, focusing on renewable energy consumption and Gross Domestic Product (GDP) as the main variables, to conduct a contemporary and long term analysis. The data for the countries included in the study are obtained from the World Bank's World Development Indicators (WDI) database. Distinct from many existing studies, this research employs the Dumitrescu Hurlin Panel Causality Test, which accounts for panel heterogeneity. The findings reveal a unidirectional causality running from economic growth to renewable energy consumption in net energy importing OECD countries. This suggests that renewable energy use tends to increase during periods of economic expansion. Therefore, enhancing renewable energy sources may be considered a viable policy recommendation to ensure uninterrupted economic growth. On the other hand, the finding that a potential decline in renewable energy use due to factors such as climate change, environmental concerns, or efficiency improvements may not adversely affect economic growth indicates that renewable energy policies should also support strategies prioritizing efficiency and conservation.