Do economic development and human capital decrease non-renewable energy consumption? Evidence for OECD countries

The false hope that economic development would lead to a decrease in fossil sources’ energy consumption can be an obstacle to fighting global warming. Is it realistic to expect that more knowledge will lead public policymakers to take more decisive action to mitigate climate change’s adverse effects? This research attempts to answer both premises using data for developed countries with high human capital levels: 27-member countries of the Organization for Economic Cooperation and Development-OECD during 1980–2015. Access to energy and that it is non-polluting is raised as a goal of the Sustainable Development Goals. We combine linear and non-linear models: we specifically employ threshold regressions and second-generation cointegration techniques, FMOLS, and causality. Our results are disappointing for the first premise: economic development does not reduce energy consumption from fossil sources. However, human capital does decrease the consumption of non-renewable energy. In order to capture current trends in economies, we include the globalization index, the urbanization rate, and services. The results of the cointegration tests suggest the existence of a long-term relationship between the variables. Our results indicate that the human capital index and globalization are the last hope to promote the transition to a more sustainable energy matrix in developed countries. •We answer the question if development and knowledge will reduce the consumption of polluting energy.•We use threshold regression and second-generation cointegration techniques.•Development does not decrease the consumption of non-polluting energy, but human capital does.•We assess the role of globalization, urbanization and services on non-renewable energy consumption.