Is renewable energy effective in promoting growth?

This paper applies panel data techniques to analyze the role of the various energy sources in economic growth, for a set of 24 European countries (1990–2007), controlling for energy consumption and energy dependency. The results suggest that the negative effect of the use of renewables supplants the positive effect of creating income by exploiting a natural resource locally, and thus growth does not appear to improve with the change towards renewables. The high costs of promoting renewables are probably being placed excessively upon the economy, namely by increasing the costs of electricity tariffs, thus inducing a deceleration in economic activity. Fossil fuels lead to dissimilar effects on growth while natural gas does not appear to be relevant in explaining growth. Coal hampers the capacity for growth, whereas the use of oil stimulates that growth. This is in line with productive structures that are deeply grounded in fossil fuels, particularly oil.