*3.3. Causality*

The causality analysis is usually the last step in the energy-growth nexus studies. Causality analysis is necessary to reveal the direction of the causal relationship, which is not revealed in the cointegration analysis. This sub-section provides information as to which causality methods have been employed. First, the study by Menegaki and Tugcu [33] in page 31–32 have employed the Dumitrescu and Hurlin [52] to examine the panel causality context in their data. Second, the study by Menegaki and Tiwari [31] in page 1264 employed panel VECM Granger/Block exogeneity Wald tests. Third, Menegaki and Tugcu [35], within their ARDL approach, have separate long run and short run effects through the elasticities and semi-elasticities in page 897. Fourth, the study by Menegaki and Tiwari [31] in page 503 employs a VECM Granger causality/Block exogeneity Wald tests. Fifth, the study by Menegaki and Tugcu [27] in pages 84–85 has used Konya [53] which is a bootstrap panel Granger causality test and is examined as a set of SUR (seemingly unrelated regression). This test relies on the lag structure and hence this should be carefully decided. Sixth, the study by Menegaki and Tugcu [30] in page 157 has employed a pairwise Granger causality test.

#### **4. Results and Discussion**

This section provides summary results of the major and focal points reached in each study about the relationship of energy consumption and sustainable economy vis-a-vis the results from the conventional energy consumption and GDP growth.

**Study 1: Sustainable economic growth and energy consumption in Asian countries**

[Full study can be found at: Menegaki, A.N., Tugcu, C.T., 2018. Two versions of the Index of Sustainable Economic Welfare (ISEW) in the energy-growth nexus for selected Asian countries. Sustainable Production and Consumption 14, 21–35]

This study has separated energy consumption into renewable and non-renewable. It has also used international trade, natural resources rents, financial development, and the consumer price index as covariates. The dependent variable was sustainable economic growth in two versions: "loose" and "strict". The used data ranged from 1990 to 2015. The results have revealed a bidirectional relationship between each of the two versions of sustainable economic growth and the rest of the covariates as well as between GDP growth and the rest of the covariates. There is only a unilateral relationship between the strict version of sustainable economic growth and international trade, but that was not significant at 5%.

Particularly, there is a bidirectional relationship between economic growth and energy consumption (either renewable or non-renewable) and between sustainable economic growth and energy consumption (either renewable or non-renewable). Thus, the Feedback Hypothesis is overall supported and this shows that energy conservation will negatively affect conventional and sustainable economic growth. The latter will then affect energy consumption and this dependence is mutual and of a spiral type. This constitutes some evidence that economic growth (not least the sustainable one) is coupled with energy consumption and without it, it will be fragile. Asia has achieved very high economic growth rates in recent years but has not managed to correct the inequalities. Environmental degradation could not be escaped and, therefore, Asian countries belong to the 70% of the world's most vulnerable countries in front of climate change. Based on the parameters constituting the sustainable economic growth, it is apparent that Asian countries are also characterized by poor performance in vital indicators, such as public health expenditure. The progress in major energy goals, such as the improvement in the electrification rates, the increased penetration of renewable energies, and particularly the progress in energy efficiency have not been able to support the required structural change that would enable the confirmation of the conservation or neutrality hypotheses. The latter, if confirmed, signal the existence of energy decoupled economies which are more sustainable. It is interesting to reflect on the result of the Feedback Hypothesis between sustainable economic growth and energy consumption, which shows that energy consumption Granger causes sustainable growth. This has ramifications on the Environmental Kuznets Curve Hypothesis, according to which developing economies cannot help degrading the environment at the first stages of their development until a point is reached, which is the turning point of the EKC, where economies actively start improving their natural environment. Overall, it would be an interesting point of further research to corroborate the findings of the energy-sustainable growth nexus with relevant findings from the EKC curves. One of the most striking implications from the results in the Asian group of countries is that governments need not take different measures for conventional and sustainable economic growth, given that their Granger causal behaviour appears the same.

#### **Study 2: Sustainable economic growth and energy consumption in Europe**

[The full study can be found at: Menegaki, A.N., Marques, A.C., Fuinhas, J.A., 2017. Redefining the energy-growth nexus with an index for sustainable economic welfare in Europe. Energy 141, 1254–1268]

Detailed results from this study can be found in Menegaki et al. (2017). The study has compared the causal behaviour between conventional economic growth with energy consumption and sustainable economic growth with energy consumption from fossil fuels and renewable resources. Covariates have used the following variables: financial sector, carbon emissions, labour, electricity produced from renewables, electricity produced from non-renewables, capital, exports, natural resource rents and inflation.

Short run causality analysis has revealed bidirectional causality between energy consumption and sustainable economic growth. Sustainable economic growth also positively affects labour, exports, financial development, rents, electricity produced from renewable,

and electricity produced from non-renewables. Energy consumption also positively affects inflation, carbon emissions, labour and capital. The corresponding analysis with conventional economic growth has revealed similar causation findings, except for the variable of labour; the latter was not significant in the conventional economic growth framework.

As far as the negative contribution of the rents to economic growth (conventional or sustainable) is concerned, it has been captured in literature (Fuinhas et al., with a negative sign for specific natural resources, such as oil production. This may be attributed to the high dependence on these resources which allow rent earning, but at the same time hinder the diversification of productive structures of these countries. Nevertheless, this effect is very small in this empirical study, because European countries rely much less on oil production for revenues. Inflation was significant only in the conventional economic growth framework, which may be an indication that sustainable economic growth is robust to price fluctuations. The effect of inflation on conventional economic growth has also been documented in Asia has achieved very high economic growth rates in recent years but has not managed to correct the inequalities Asia has achieved very high economic growth rates in recent years but has not managed to correct the inequalities.In countries with high inflation, businesses suffer, and their operational environment is not favourable. Regarding the significance of labour in the sustainable economy, we need to remember that the reporting for conventional economic growth does not take into account the contributions of unofficial labour and the disservices from unemployment. Therefore, the latter acknowledgements throw some light as to why labour appears significant in the sustainable economy and not the conventional economic growth.

A result that causes scepticism is the positive significance of fossil fuelled electricity only in the conventional economic growth model. This finding is in line with previous literature which supports that renewables hamper economic growth. The current study corroborates this, given the significant negative sign of renewables in the sustainable economic growth framework. The larger coefficient estimated for capital in the welfare nexus than the conventional one shows that shocks, such as the financial crisis which entailed severe investment cuttings, could compromise the implementation of sustainable development in Europe. Sustainable economies need to increase or renew their capital base. Overall, the small differences between the welfare and the economic framework show that these frameworks are not perfect substitutes.

#### **Study 3: Sustainable economic growth and energy consumption in G7 countries**

[The full study can be found at: Menegaki, A.N., Tugcu, C.T., 2017. Energy consumption and Sustainable Economic Welfare in G7 countries; A comparison with the conventional nexus. Renewable and Sustainable Energy Reviews 69, 892–901]

G7 countries play important roles in the global political and economic scene. Their decisions affect the global financial architecture, and they are usually regarded as exemplar policy actors by developing countries. The study on G7 countries has employed capital, labour, and research and development (R&D) expenditure as a proxy for education and energy consumption. The sustainable economic growth has assumed two versions: "light" and the "strict".

The Feedback Hypothesis is confirmed only between strict sustainable economic growth and energy consumption, while between the light sustainable economic growth and energy consumption we observe the Conservation Hypothesis. The same hypothesis is also confirmed in the GDP framework. The rest of the covariates all have a positive significant effect, except for labour with a negative sign in the strict welfare and energy consumption, which enters with a negative sign in the light welfare framework.

Based on the results derived from this set of countries, G7 most likely will be resilient to energy conservation measures and their sustainable development progress will not be hindered. Within the framework of the strict welfare, G7 economies show a feedback behaviour which means that resilience is not strong enough.

**Study 4: Sustainable economic growth and energy consumption in American countries**

[The full study can be found at: Menegaki, A.N., Tiwari, A.K., 2017. The index of sustainable economic welfare in the energy-growth nexus for American countries. Ecological Indicators 72, 494–509]

This study is based on data from 1990 to 2013 on 20 American countries. These data are: labour, capital, carbon emissions, energy use, renewable energy, rents, and trade. This study examines the relationship between energy consumption and economic growth (conventional and sustainable). Results do not reveal a relationship between energy consumption and growth whatsoever, but they clearly provide support for the Growth Hypothesis between renewable energy and GDP growth. On the other hand, results also support the Feedback Hypothesis between renewable energy sustainable economic growth. Another important finding is that the speed of adjustment for GDP growth is −0.380, while for the sustainable growth, it is −0.625. This entails that if the equilibrium situation in each case is perturbated, the sustainable growth can come to equilibrium at a higher speed (almost double) than the GDP growth.

As far as the energy consumption variable is concerned, this variable is only affected by capital under the sustainable economy framework. Renewable energy resources are affected by trade under both frameworks (GDP growth and sustainable economy). Had we stayed with conventional analysis in the first place, the non-existence of Granger causality between energy and GDP would have been mistaken for the Neutrality Hypothesis. In such a situation conservation measures on energy are not expected to retard economic growth. Contrary to this, the additional information we receive from the renewable energysustainable economy, namely the confirmation of the Feedback Hypothesis, provides a useful warning for policy makers: Therefore, applying conservation measures in renewable energy consumption will eventually cause a de-growth result and this, in turn, will impact on the development of renewable energies and it will slow down their penetration in the American countries.

Last, but not least, the results from Menegaki and Tiwari [31] inform us in the sustainable economy framework that the same amount of energy or renewable energy Granger causes a smaller effect on sustainable economy than the GDP economy. This is a sound indication that the sustainable economy is more stable and less prone to the fluctuations that can be caused by the application of energy conservation measures.

**Study 5. Sustainable economic growth and energy consumption in emerging economies**

[The full study can be found at: Menegaki, A.N., Tugcu, C.T., 2016. The sensitivity of growth, conservation, feedback & neutrality hypotheses to sustainability accounting. Energy for Sustainable Development 34, 77–87]

The study is based on 15 emerging economies and uses two versions of sustainable economy. The light and the strict version of sustainable economic growth vis a vis the conventional economic growth as denoted by the GDP growth. Thus, besides the aforementioned variables, the rest of the employed variables are capital, labour, openness of economy (imports and exports) and of course energy consumption. Based on the estimated results, in 8/15 countries, the confirmed hypothesis does not vary between the conventional growth framework and the sustainable economy (strong version). For 13 out of 15 countries, the same hypothesis is observed between the basic and the solid version of sustainable economy. For 8 out of 15 economies the same hypothesis is observed between GDP and the two versions of sustainable economy. Different causalities between the light and strong version of the sustainable economy are noted only for Poland and South Africa. Moreover, Brazil and Malaysia confirm the Feedback Hypothesis in the GDP framework, while for the sustainable economy framework the Growth Hypothesis is supported. Thus, had policy makers ignored the different results applicable between the conventional and the sustainable economy, it would have resulted in the possibility of changing energy consumption by changing welfare. A different situation applies for Colombia and Indonesia. The Growth Hypothesis applies in the GDP economy, while the Feedback Hypothesis applies for the sustainable economy. The latter entails that conservation measures will have repercussions on sustainability and, in turn, on energy.

#### **Study 6. Sustainable economic growth and energy consumption in Sub-Saharan countries**

[The full study can be found at: Menegaki, A.N.; Tugcu, C.T. Rethinking the energygrowth nexus: Proposing an index of sustainable economic welfare for sub-saharan africa. *Energy Res. Soc. Sci.* **2016**, *17*, 147–159]

The African region has been in the foreground of the summits of G8 since 2000. Due to its socio-economic and environmental characteristics, this region can play an important role for combating climate change. Thus, the way official assistance, with respect to energy is designed, is important, and such studies can inform policy making towards the right decisions. The study is based on 42 countries within the data span between 1985 and 2013. Besides GDP growth, sustainable economy growth, and energy consumption, the following variables are used: capital, carbon emissions, trade, and inflation. Granger causality results have provided support for the Feedback Hypothesis between energy consumption and the sustainable economy growth. A similar bidirectional relationship has been confirmed between capital and sustainable economy and between trade and sustainable economy. Moreover, we note a unidirectional Granger causality running from sustainable economy to rents and from carbon emissions to sustainable economy. The support for the Feedback Hypothesis between sustainable economy and energy consumption means that each magnitude affects the other and no conservation measures can take place without compromising sustainability. According to Menegaki and Tugcu [11], this finding can be expected to occur in the context of underdeveloped or developing economies which are in need of a minimum threshold of energy consumption that cannot be avoided, and it will put the sustainable economy on track. Thus, it may be the case that it is too early for the studied countries to be controlled in their energy consumption.

#### **5. Concluding Remarks**

The new trend of economic thinking and planning, with respect to sustainable economic growth and not the traditional economic growth as revealed by GDP, has led to the investigation of the so called energy-growth nexus from this new perspective. The current paper summarizes the gist causality results from a series of six studies which have been devoted to the investigation of the energy-sustainable economic growth relationship in various groups of countries worldwide. While the idea was first applied to a set of Sub-Saharan countries, mainly because it was a region suffering from poverty and because of the role it could play in the global sustainability, the interesting results the first study reached gave the initiative for the gradual study of an additional set of countries, covering almost the whole world.

Nowadays, besides the abundant studies in the conventional energy-growth nexus field which have been implemented for various single countries and groups of countries, there are a number of studies dealing with the relationship between energy consumption and a sustainable economy. A striking result is that almost all studies, and thus all country sets, provide support for the Feedback Hypothesis between energy consumption and sustainable economy. Despite the different econometric methods and the different timespans and covariates, the studies end up resulting in the same common finding, namely the bidirectional causal relationship between energy consumption and sustainable economy, which entails that sustainability cannot be ye<sup>t</sup> achieved with energy conservation. Despite energy conservation being an action towards sustainability, energy consumption is still much required for the implementation of a sustainable economy. It is most surprising that this result is apparent worldwide with no differentiation between developed and underdeveloped countries. This might reflect the many dimensions of the sustainability agenda, such as the late and insufficient adoption of renewable energies by most countries due to their high cost, and the only recent adoption of circular economy practices, climate change mitigation etc. Generally, the worldwide evidence of the Feedback Hypothesis in the energy-sustainable economy relationship is a signal that sustainability requires a major structural transformation of economies, which is both energy and fossil energy intensive.

Of course, it is understood that the sustainable economy index that the series of studies has employed is far from perfect. However, the criticism received for the Index of Sustainable Economic Welfare is widely known, but still the lack of a better index allows withstanding of this criticism. Next, the main conclusions derived from the sampled studies are presented and compared.

#### *5.1. Study 1 (Asia)*

Contrary to other country groups, in the group of Asian countries no different implications appear for economic growth, either conventional or sustainable. Thus, policy makers in the energy sector can apply a uniform energy policy. However, since conservation measures will restrain growth generally, it would be advisable that the policy makers refrain from that altogether. This may be due to the fact that Asian countries in our sample are developing countries, and this entails that that they have not ye<sup>t</sup> reached the time point at which they can decouple their growth from energy consumption.

#### *5.2. Study 2 (Europe)*

Particularly for the European sample of countries, the positive effect of capital investment is larger in the sustainable nexus than the conventional, which reveals that when economies are faced with financial shocks, such as an economic crisis, reducing investment can also reduce sustainable economic growth. Significant differences exist between the long and short run in the energy-growth relationship of European countries. In the short run, conservation policies put more strain on the GDP rather than the sustainable economy. The opposite applies for the long run horizon. As far as the comparison of results in the conventional energy-growth nexus is concerned, the positive effect of capital investment is lower in the conventional energy-growth nexus as compared to the sustainable one. This highlights the importance of not cutting down on investment, a fact that can seriously delay sustainable growth. Despite this, the study reveals that sustainable growth also affects energy consumption, both in the short and the long run. Thus, energy conservation policies, albeit taking place in the short run, bear long-term implications.

#### *5.3. Study 3 (G7 Countries)*

G7 are the seven richest economies, so it is important to observe the energy-growth relationship in them. Basic sustainable growth (as a separate sustainability indicator and defined in the relevant study) is affected negatively by energy consumption, which is some evidence that G7 countries have reached a point in their history of economic growth and development where additional energy consumption can do no better. The same is not suggested with conventional economic growth however, and this underlines the importance of studying these two contexts together (the conventional energy-growth model with the sustainable economy-growth model). In this relationship the energy-growth is mutually caused by each other, thus any energy conservation measures will bring economic growth to a halt. This case study reveals that sustainable economic growth is more fragile in G7 countries than in the Asian or European ones. This may be due to the fact that the seven richest countries have relied much on energy consumption and environment exploitation in order to reach their high growth level.

#### *5.4. Study 4 (American Countries)*

In the American group of countries, we find that energy does not affect either type of economic growth. While this lends support for the Neutrality Hypothesis, the picture is different in the separate case of the effect of renewable energy, unveiling a feedback hypothesis which entails that renewable energy conservation will lead to a de-growth of American economies. The situation revealed in this case study is quite different from all the above cases and with no implications for policy making, because it appears that growth is not dependent on energy consumption. The structure of the economy is different and

probably with an advancement in energy efficiency which enables growth decoupled from energy. Thus energy conservation will bear no negative consequences for growth.

#### *5.5. Study 5 (Emerging Economies)*

This study suggests caution towards the results received between the different versions of sustainable GDP and the different results reached when comparing the conventional energy-growth nexus with the sustainable energy-growth nexus. It is understandable that the constructed ISEW is far from perfect and has been built based on the available information concerning basic sustainable GDP components. The method used in this study enables reaching results for each country separately. In nine countries, causality results are stable across the conventional growth and the different definitions of sustainable growth that are identified in the study. These countries are Chile, China, Colombia, India, Mexico, Morocco, Philippines, Thailand, and Turkey. In the rest of the countries, there are different results, either between the conventional and sustainable aspect of growth, or between the different versions of sustainability. Hence, one cannot make comparisons between this group of countries and the rest stated in this review.

#### *5.6. Study 6 (Sub-Saharan Countries)*

For Sub-Saharan countries it is found that energy conservation policies will restrict sustainable development. Due to its characteristics, this region will play a fundamental role in combating climate change. The huge income inequalities in Sub-Saharan countries require the usage of a more comprehensive measure of economic growth, such as the sustainable GDP. This study has resulted in a bidirectional relationship between energy consumption and sustainable growth, which means that these two magnitudes fuel each other. On the other hand, no relationship is revealed between energy consumption and economic growth, which supports the existence of the Neutrality Hypothesis. Thus, energy conservation will negatively affect sustainable growth but will not affect conventional growth and thus must be taken into consideration by policy makers who pursue sustainability. Conversely to the American sample of studies, where neutrality is evidenced in both cases of economic growth (conventional and sustainable), the Sub-Saharan case study reveals that neutrality is the case only for the conventional economic growth and not its sustainable counterpart.

**Funding:** This research received no external funding.

**Institutional Review Board Statement:** Not applicable.

**Informed Consent Statement:** Not applicable.

**Data Availability Statement:** Not applicable.

**Conflicts of Interest:** The authors declare no conflict of interest.
