Does Energy Efficiency Promote Economic Growth?

This paper examines the causal relationship between energy efficiency and economic growth based on panel data for 56 high- and middle-income countries from 1978 to 2012. Using a panel vector autoregression approach, the study finds evidence of a long-run Granger causality from economic growth to lower energy intensity for all countries. The study also finds evidence of long-run bidirectional causality between lower energy intensity and higher economic growth for middle-income countries. This finding suggests that beyond climate benefits, middle-income countries may also earn an extra growth dividend from energy efficiency measures.