What is the role of the rents in energy connection with economic growth for China and the United States

Abstract

Energy is one of the essential factors in the industrial production process, and it is important for economic growth. Within the context of the debate on the ecological consequences of energy usage and the importance of renewable energy, we have analyzed the relationships between fossil energy and GDP for both China and the United States. This study has been constructed on related economic data from 1990 to 2015. By employing the Hacker and Hatemi-J (2006) causality tests and the Autoregressive Distributed Lag (ARDL) bounds testing approach, we have examined the relationship between economic growth (GDP) and all of the following: natural gas rents, renewable energy consumption, renewable electricity production, coal rents, and oil rents. The main contribution of this study to literature is relating and analyzing the relationship between GDP and all of the following: renewable energy (RE) consumption and production, fossil energy consumption and production, as well as gas/coal/oil rents for the United States and China. It considers the nexus not only separately but also collectively. Furthermore, to explore the causality connection between each type of energy input, this method is employed. Our empirical findings show that there is no long-term causal relationship among these variables for China while there is a long-term causal relationship among the variables in the United States. In addition, we found that the RE production, fossil energy production, and consumption, GDP, rents, all of these variables cause RE consumption in both China and the United States