Does environmentally friendly energy consumption spur economic progress: empirical evidence from the Nordic...

Exploring energy use-growth nexus can proffer valuable clues to policymakers and stakeholders on both economic and environmental sustainability targets. Unlike extant studies, this study focuses on the effects of renewable energy consumption on the economic progress of the Nordic countries including Denmark, Sweden, Norway, Finland, and Iceland. The empirical analysis encompasses two distinctive renewable energy consumption indicators while accounting for influential factors like research and development (R&D) expenditures, and both human and physical capital components within the traditional growth model framework. The DCCE estimator was deployed for the empirical analysis covering the available sample data between 1995 and 2020. From the results, the estimated impact of renewable energy consumption on economic progress varies according to its measurement vis-à-vis the utilized indicator 1 (renewable as % of total energy use) and indicator 2 (distinctive renewable power sources and biofuels). In the case of the former indicator, the impacts were insignificant while a positive significant impact on growth was seen across all model evaluations using both the GDP and per capita income levels of the Nordic countries in the latter indicator. Furthermore, both R&D expenditures and human capital component are essential significant long-run drivers of both economic growth and income levels in the bloc while physical capital formation produced contrary evidence on economic progress in the bloc. As such, policy implications and recommendations to enhance economic progress were suggested in the main text for the Nordic countries in view of renewable energy development and the bloc's environmental sustainability drive. Notably, strategic policy implementation should be geared towards encouraging more R&D expenditures, especially in renewable energy developments to facilitate economic growth and income levels while further positioning the Nordic bloc on environmental sustainability path.