The renewable energy and economic growth nexus in European countries

Abstract The study examines the long‐run relationship between renewable energy consumption and economic growth within the framework of the traditional production function in 29 European countries from 1995 to 2016. The study was based on the panel unit root tests, panel cointegration test—the Kao (1999), Pedroni (1999, 2004), Westerlund (2005) and fully modified ordinary least squares estimator and dynamic ordinary least squares estimator. The study found that there is a long‐term equilibrium relationship between economic growth and renewable energy consumption and that renewable energy consumption has a positive impact on economic growth. The results suggest that the use of renewable energy as a global commodity in the process of economic growth is highly significant. Therefore, policies to promote renewables can provide for economic growth, an increase in renewables and the reduction of greenhouse gas (GHG) emissions, and ensure important sustainable development goals.