Does energy trilemma a driver of economic growth? The roles of energy use, population growth, and financial development

Economic growth can increase the economy's energy intensity, impeding security through unmanaged demand and affecting sustainability. This study employed energy use, population growth, and financial development from 1990 to 2016 as moderator variables to examine the impact of energy trilemma on the economic growth of the top ten countries in the World Energy Trilemma Index (WETI) 2020. We applied advanced econometric methodologies for empirical analysis, such as second-generation panel unit root tests, and cross-section dependence. Besides, we used the random-effect and fixed effect panel generalized method of moments (GMM) for short-run estimates and the random effect and fixed effect generalized least squares (GLS) regressions and robust fully modified least squares (FMOLS) regression for the long-run estimates. The results indicate that the impact of energy trilemma and population growth on economic growth are significant only in the long-run, while energy use and financial development influence economic growth in both the short-run and the long-run. Our findings suggest that policymakers implement lesser potential for Pareto perfections in the energy system by levying energy security, affordability, and sustainability taxes on energy products, and that they highlight energy efficiency and support robust policies to enhance financial development. Study limitations and directions for future research in the area are discussed.

Automated summary

The impact of energy trilemma and population growth on economic growth is significant in the long run, while energy use and financial development influence economic growth in both the short run and the long run. Policymakers are advised to levy energy taxes to promote efficiency in the energy system and emphasize energy conservation and support for financial development.