Assessing economic growth-energy consumption-CO₂ nexus by climate zone: international evidence

The energy economics literature lacks a consensus on the short- and long-term linkages along with the Granger causality direction between economic growth and energy consumption. This paper examines the relationships between economic growth, fossil fuel and renewable energy consumption, CO₂ emissions, temperature, and population in 56 countries from 1990 to 2019. We contribute to the literature by uniquely grouping countries by climate zone (i.e., tropical, arid, temperate, and continental) following the Köppen-Geiger climate classification approach and employing a panel structural vector autoregressive model (P-SVAR) to study these relationships. In addition, rather than mistakenly using a single energy consumption variable, we divide it into two categories: fossil fuel and renewable energy consumption. Our findings indicate that temperature change has the most negligible impact on economic growth, while CO₂ and renewable energy have the two most significant effects. Our Granger causality tests support all four hypotheses (growth, feedback, conservative, and neutral) that describe the relationship between economic performance and energy consumption, indicating the level of difficulty in recommending an overarching energy policy worldwide. We find that conservative energy consumption and clean energy policies that avoid CO₂ emissions may benefit the selected countries' economic prosperities.