Energy Use and Gross Domestic Product under Income Uncertainty: Evidence from Net Importing and Net Exporting Countries

This study is designed to observe if energy intensity has really diminished (efficiency has increased) over the period of time. This requires a significant inverse long run relationship between energy use and GDP. Additionally we assess the above relationship in concurrent with income uncertainty to comment on the sustainability of energy efficiency. Therefore we estimate a long run relationship between energy use and GDP for a very large sample of countries commonly classified into net importing (developing), net exporting developed) countries for the period of 1970-2016.
We find a significant inverse relationship between energy use and GDP—confirming the dematerialization process for most of the developed countries. On the other hand we find a significant and directly proportional relation between energy use and GDP for a range of developing/emerging economies. We also find bidirectional causality for a mix of developing and developed countries. More interestingly we observe that income uncertainty depresses the energy use in all types of energy-GDP relationships across all classifications of countries. This provides additional insights to the policy makers to take appropriate measures to maintain energy efficiency subject to income shocks.