Does energy efficiency promote economic growth? Evidence from a multicountry and multisectoral panel dataset

Highlights: • Test Granger causality between energy intensity and GDP growth • Unidirectional causality from GDP to intensity for high-income economies • Bidirectional causality between GDP and intensity for lower-middle-income economies • Bidirectional causality for the industrial sector of upper-middle-income economies • Energy efficiency generates growth benefits for developing economies. - Abstract: We examine the causal relationship between energy efficiency and economic growth based on panel data for 56 high- and middle-income economies from 1978 to 2012. Using a panel vector autoregression approach, we find evidence of a long-run Granger causality from economic growth to lower energy intensity for all economies. We also find evidence of long-run bidirectional causality between lower energy intensity and higher economic growth for middle-income economies. This finding suggests that beyond climate benefits, middle-income economies may also earn an extra growth dividend from energy efficiency measures.