Since the oil shocks (1973, 1979-1980), the relationship between energy consumption and

economic growth has been an area of intense empirical and theoritical investigation [Erol and
Yu (1987), Masih and Masih (1996) , Asafu-Adjaye (2000), Morimoto and Hope (2004), Lee
(2006), Lee and Chang (2007)]. In addition, the Rio Conference (1992) marked a turning
point in the economic policies and development strategies of developped countries. Since that
date, the concept of sustainable development had taken its starting point in economic policies,
which had prompted the development of new strategic tools in order to cope with the
degradation of the environment. As a result, as part of the sustainable development strategy,
policies that aim to save energy and to develop renewable energy technologies have become a
priority. Such policies are based on analyses of the relationship between renewable energy
consumption and economic growth. In this context, Sadorsky (2009), Menyah and Wolde
Rufael (2010) and Menegaki (2011) show that economic growth and renewable energy
consumption affect each other. On their part, developing countries, in particular the black
gold producers, are doubly impacted by the policies of sustainable development. In fact, on
the one hand, these countries must take into account the finiteness of their natural resources
and the national energy security. On the other hand, the gradual substitution of fossil energy
with renewable energy in developed countries pushes the developing countries to concern
themselves with the issue of environmental degradation, which increases their responsibility
towards their future generations.

The relationship between energy consumption and GDP (gross domestic product) is an area of
intense empirical and theoritical investigation using different approaches (Yoo 2006). The
results of these studies, in particular those proofing the causality, have served as indicators for
economic policies of many countries. Moreover, according to the statistics of the International
Energy Agency, conventional energy consumption has increased more than GDP over the last
two decades (Sokona et al 2004). Furthermore, in his study on Western Europe, Behname
(2012) finds that there is a short and long term bidirectional relationship between renewable
energy consumption and economic growth.

In this context, we expand the discussion to explore (1) what is the nature of the relationship
between energy consumption and GDP growth?; and (2) What is the impact of using
renewable energy on economic growth in short and long term? To answer this set of
questions, first we go back to the theory to clearly the study of the relationship between
energy consumption and economic growth. Second, there is a pressing need to better
understand how CO2 emissions impact the growth. Despite recent research that has identified
linked feedbacks between the consumption of renewable energies and economic growth,
understanding this relationship in short and long run is nascent. Or it is important to
understand the dynamics between renewable energy and economic growth, which this study
attempts to address. Unlike previous studies, this study considers the consumption of energy,
the CO2 emission and the use of renewable energy in order to differentiate the relative impact
of each in the economic growth process. Second, it examines for the first time the sign and
direction of long-run panel Granger causality between these three variables and economic
growth across a sample of countries that belong to specific regional areas.

The balance of paper is organized as follows. Section 2 provides an extensive review of the
relevant literature on the link between energy consumption, CO2 emissions, renewable
energy and economic growth. Section 3 discusses the data, methodology, and empirical
results. Finally, Section 4 provides concluding remarks and policy implications from the
empirical findings.