Relationship between electricity consumption and growth in sustainable development

The basis of the countries' economy relies on energy which is an important indicator of economic and social development. The use of fossil energy sources while meeting the energy needs emerges as a factor that increases carbon dioxide (CO2) emission which is a significant environmental pollution indicator. Nowadays, depending on the relationship between development, energy and environment, sustainable development, environmental and energy economics, renewable energy sources became frequently discussed issues. In this study, the correlation between the CO2 emission, electricity consumption and economic growth in OECD countries between the years 1980-2010 has been analysed. Primarily, in order to detect whether the variables used in the model - in which CO2 emission is the dependent variable and electricity consumption and economic growth are the explanatory variables- contain unit roots or not, Levin-Lin-Chiu, Im-Pesaran-Shin, Breitung and Fisher type, CADF and CIPS unit root tests are used. As a result of unit root tests, while the cross sectional units forming panels in 30 OECD countries weren't stable in the level, it was understood that they became stable after the first variations were collected. Pedroni, Kao, Johansen Fisher and Westerlund Error Correction panel cointegration tests were applied to analyse whether there was a long term relation between the variables forming the model or not. As a result of these tests, it was concluded that there is a cointegration relationship between CO2 emissions, Gross Domestic Product and electricity consumption. Dynamic Ordinary Least Square estimator has been used for long-term estimation of coefficients. Long-term forecasts has shown that there is a statistically significant relationship between electricity consumption and CO2 emissions in the majority of 30 OECD countries. Also, conclusions supporting the Environmental Kuznets Curve (EKC) hypothesis were achieved, representing a nonlinear relationship between CO2 emissions and economic growth. Finally, analysis have been made on the question as to whether there was a causal relationship between the variables used in the study or not via Panel Vector Error Correction Model and Dumitrescu-Hurlin causality tests. The results of the analysis show that, in 30 OECD countries, there is a unidirectional causality relationship between Gross Domestic Product and CO2 emission and bidirectional causality relationship between Gross Domestic Product and electricity consumption in the short term. Moreover, in G7 countries, bidirectional causal relationships between Gross Domestic Product and CO2 emission, and between Gross Domestic Product and electricity consumption in addition to a unidirectional one from electricity consumption towards CO2 emission were detected; while in 23 OECD countries, from CO2 emission toward Gross Domestic Product and from electricity consumption towards CO2 emission, unidirectional causal relationships were detected.