Output, renewable and non-renewable energy consumption and international trade: Evidence from a panel of 69 countries

This paper uses panel cointegration techniques to examine the causal relationship between output, renewable and non-renewable energy consumption, and international trade for a sample of 69 countries during the period 1980-2007. In the short-run, Granger causality tests show that there is evidence of a bidirectional causality between output and trade (exports or imports), a one way causality running from renewable energy consumption to trade, and a bidirectional feedback causality between non-renewable energy consumption and trade. Interestingly, there is no direct short-run causality between the three variables renewable energy, non-renewable energy and output. However, there is an indirect short-run causality running from renewable energy to both non-renewable energy and output, which occurs through trade. Also, there is an indirect and bidirectional short-run causality between non-renewable energy and output through trade. In the long-run, OLS, FMOLS and DOLS estimates suggest that renewable and non-renewable energy consumption and trade have a positive and statistically significant impact on economic growth. Our policy recommendations are to encourage trade openness because this may reduce the share of non-renewable energy consumption in total energy consumption. Indeed, through technology transfer and economies of scale, more trade openness could be a good policy for combating global warming by encouraging the use of renewable energies, while increasing output