Abstract
Energy arguably plays a vital role in economic development and testing causality between energy and economic growth has been a well-researched topic for several decades. Sound evidence on whether casualty exits between energy and economic growth is important for energy policy makers, particularly given global environmental problems. If, for example, causality from energy to economic growth is greater in the developing world, then any policy to reduce energy consumption (and hence emissions) may have a disproportionate effect on their development. Many previous studies have attempted to test for causality between energy and economic growth, but no consensus has emerged. This research for this thesis is (as far is known) the first time that this issue has been addressed by systematically testing for causality using a consistent data set and methodology for over 100 countries, the countries being classified either as OECD/developed and non-OECD/developing countries or High, Mid, and Low development countries (according to the Human Development Index (HDI)). To undertake this task, two econometric methodologies are used, 'causality based on a time series approach' and 'causality based on a panel co-integration approach'. In addition to testing for causality between 'aggregate' energy and economic growth, causality between the two main energy consumption types: electricity and petroleum, and economic growth is also analysed. The results from the analysis suggest that, in general, there is mutual interdependence between energy and economy in all groups of countries. However, within this there are some disparities between the different development groups. Consequently, any policy to reduce aggregate energy consumption aimed at reducing emissions might have a greater impact on the GDP of the developed world than the developing world, although this is not necessarily the case for the individual energy types, electricity and petroleum.