On the renewable, non-renewable energy consumption and growth nexus in emerging economies: Empirical evidence from Turkey

Since carbon-emitting energy sources are the largest contributor to global warming and climate change, this present paper attempts to contribute to the current debate in energy-growth nexus in the literature. Focusing on the case of Turkey, it seeks to find out whether or not switching to a low-carbon path will be beneficial for this fastest-growing OECD economy by investigating the relationship between energy sources (both renewable and non-renewable) and economic growth over the period of 1990-2015. Based on the annual data, it uses an energy-incorporated Cobb-Douglas production function to perform an ARDL bounds test to check for long-term cointegration and a VECM approach to find the direction of causal relationship in the short-run and long-run. Empirical analysis revealed four findings: (1) all variables are cointegrated in the long-run; (2) there is a bidirectional causality running from growth to renewable energy consumption in the long-run, but no meaningful relationship is found in the short-run; (3) economic growth also drives nonrenewable energy consumption both in the short-run and long-run; (4) despite the lack of relationship in the short-run, the long-run unidirectional causality shows that non-renewable energy consumption has a direct impact on the use of renewables. The outcome of the analysis indicates that energy is not a limiting factor to growth in Turkey; therefore, confirming the validity of conservation hypothesis. In the short-run, the main policy recommendation is to focus on energy conservation strategies either by curtailing the consumption or improving the efficiency without having any adverse impact on growth. In the long-run, energy diversification should be the ultimate goal. By integrating renewables into its energy mix, Turkey can decarbonize its economy, followed by the benefits including substantial debt-relief thanks to energy independence, increased energy security, and a drastic reduction in CO2 emissions. Thus, the promotion of renewables will be vital for addressing the social, economic, and environmental concerns in the future