Nuclear Energy Consumption and Eco-nomic Growth

Nuclear energy is an important energy source for both long-term energy and environmental strategies and can address energy needs in areas with scarce resources.  Additionally, nuclear energy has been found to have an impact on economic growth.  Apergis et al. (2010) studied the relationship between nuclear energy consumption and economic growth within a multivariate panel framework for the period 1980–2005.  Using a heterogeneous panel cointegration test, the authors found a long-run equilibrium relationship between real GDP, nuclear energy consumption, real gross fixed capital formation, and the labor force.  Additionally, the panel vector error correction model revealed bidirectional causality between nuclear energy consumption and economic growth in the short-run and unidirectional causality from nuclear energy consumption to economic growth in the long run.  These results support the feedback hypothesis that energy consumption and economic growth are interrelated and thus may serve as complements to each other. —Carolyn Campbell
Apergis, N<!–[if supportFields]> XE “nitrogen, N” <![endif]–><!–[if supportFields]><![endif]–><!–[if supportFields]> XE “nitrogen” <![endif]–><!–[if supportFields]><![endif]–>., Payne, J.E., 2010. A panel study of nuclear energy consumption and economic growth. Energy Economics 32, 545–549.
Nuclear energy is an important power source of a growing interest as the world develops long-term energy and environmental policy.  The Energy Information Administration anticipates that electricity generation from nuclear power will increase from approximately 2.7 trillion kilowatt hours in 2006 to 3.8 trillion kilowatt hours in 2030.  This increase can be attributed to concerns regarding greenhouse gas emissions from fossil fuel energy sources, volatility of world oil and gas prices, as well as political issues faced by countries dependent on foreign oil.  In discussing nuclear energy as an option for sustainable development, it is important to address its impact on economic growth.  Four main hypotheses have been linked with the causal relationship between energy consumption and economic growth.  First, the growth hypothesis predicts that energy consumption will both directly and indirectly impact economic growth as a complement to labor and capital in the production process.  This hypothesis is supported by unidirectional causality from energy consumption to economic growth.  Second, the conservation hypothesis presumes that energy conservation policies that reduce energy consumption and waste do not negatively impact economic growth, supported by unidirectional causality from economic growth to energy consumption.  Third, the feedback hypothesis suggests that energy consumption and economic growth are interrelated and serve as complements to each other.  This hypothesis is supported when there is bidirectional causality between energy consumption and economic growth.  Finally, the neutrality hypothesis assumes that energy consumption is a relatively small component of overall output and therefore has little or no impact on economic growth, supported by the absence of any causal relationship.
In order to determine the relationship between nuclear energy consumption and economic growth the authors analyzed annual data from 1980 to 2005 for Argentina<!–[if supportFields]> XE “Argentina” <![endif]–><!–[if supportFields]><![endif]–>, Belgium, Bulgaria, Canada<!–[if supportFields]> XE “Canada” <![endif]–><!–[if supportFields]><![endif]–>, Finland, France, India<!–[if supportFields]> XE “India” <![endif]–><!–[if supportFields]><![endif]–>, Japan, Netherlands, Pakistan, South Korea, Spain, Sweden<!–[if supportFields]> XE “Sweden” <![endif]–><!–[if supportFields]><![endif]–>, Switzerland, U.K., and U.S.  Included in the multivariate framework were real GDP, real gross fixed capital formation, total labor force, and nuclear energy consumption.  First, a heterogeneous panel cointegration test was conducted for both panel data sets, one including France and one excluding France due to its heavy dependence on nuclear energy.  The test revealed a long-run equilibrium relationship between real GDP, nuclear energy consumption, real gross fixed capital formation, and the labor force.  Second, to infer the causal relationship between the variables, a panel of error correction models was estimated.  The authors found short-run bidirectional causality between nuclear energy consumption and economic growth and long-run unidirectional causality from nuclear energy consumption to economic growth.  The short-run bidirectional causality supports the feedback hypothesis and suggests that energy policies designed to increase the production and consumption of nuclear energy will have a positive affect on economic growth.  

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