Causality nexus of renewable energy consumption and social development: Evidence from high-income countries

A substantial body of research has been carried out to analyze the determinants of renewable energy consumption, taking into consideration wide range of variables related to economic performance, environmental, institutional and political conditions. Nevertheless, little is known about the impact of social development on renewable energy consumption. The aim of the paper is to overcome this shortcoming and to investigate the causality nexus of renewable energy consumption and social development in the short and the long run, using a panel data set for 27 high-income countries over the period 1995-2015. The proposed methodology is based on the calculation of a Social Development Index (SDI) by aggregating several indicators related to social wellbeing. Next, a causality analysis is made based on the Engle-Granger two-step approach. Empirical analysis shows that social development contributes significantly to renewable energy consumption in the long-run, but not in the short-run. Nevertheless, based on a simulation analysis by generating from 1% to 10% additional annual growth rate in the SDI, we show that an additional 7% in the annual growth rate in social development is sufficient to make its short-run effect significant, and the highest impact is expected to be reached by the first additional 3%. (C) 2021 Elsevier Ltd. All rights reserved.