Renewable electricity generation and economic growth: Panel-data analysis for OECD members

Abstract

Fossil fuels, which are considered to be one of the main reasons of some environmental problems such as global warming, climate change, and soon, are being replaced by alternative (renewable) energy sources in accordance with various agreements and binding resolutions. Nowadays, electricity consumption, the biggest input for economic and social development, is increasing constantly. Electricity generation from renewable sources is one of the objectives of sustainable development in order to satisfy this consumption demand. The study analyzes the relationship between electricity generation from renewable resources and economic growth in OECD countries for the period of 1980- 2007 using panel-data method. The analysis indicates that there is a long term positive relationship between renewable electricity generation and economic growth, and a bidirectional (reciprocal) causality between these variables. An increase in electricity generation from renewable sources contributes sustainable development, as well as long term growth performance.