Eko 765 : Causality between GDP, Renewable Energy and CO2 within a sustainable development framework

Abstract: The purpose of this paper is to investigate the causal relationship between GDP and renewable energy. In order to find a significant relationship, a literature review is first analyzed in order to select the right methods for analysis. A simple model of GDP determination is chosen to inspect the relationship of society and sustainable energy production, as well as account for externalities on the environment by including emissions as an explanatory variable. The UN framework of sustainable development is used to highlight the need for action in the renewables energy sector. Concepts of emergy and transformity are employed to give a better understanding on the nature of energy and its crucial importance to economic development. The validity of these affirmations in terms of the nexus of causality will be done through economic methods: critical tests such as Pedroni cointegration, Granger causality and others will be used. These findings lead to useful policy implications for countries attempting to promote renewable energy and energy development. Unidirectional causality running from GDP growth to growth in the percentage of renewable energy consumption is found.