Analysis of the long-run relationship between public capital, economic growth, and (non-)renewable energy consumption: a pooled mean group approach

Abstract

This study examines the long-run interplay between public capital, economic growth, and energy consumption (renewable and non-renewable) across 48 countries over the period 1981 to 2019. Based on the PMG-ARDL approach, we contribute dual insights. First, a 1% increase in public capital boosts income growth by 0.34% and raises renewable and fossil-based energy consumption by 0.46% and 0.23%, respectively, highlighting the potential of public investments to facilitate a shift towards more sustainable energy usage; and a 1% rise in renewable energy use leads to a 0.39% decrease in fossil-based energy. Second, heterogenous panel causality tests indicate bidirectional causality between public capital and output, private capital, and employment. Importantly, income influences both forms of energy consumption, but the reverse is not statistically significant. These empirics underscore the significant role of public infrastructure investments in promoting economic development and steering the energy sector towards sustainability, offering vital policy insights for accelerating the transition to a low-carbon economy, thereby supporting the achievement of SDGs 7, 8, 9, and 13.