The Nexus of Energy Consumption and Economic Growth: A Case Study of the East Asia and Pacific Region

Abstract

Energy plays a vital role in the economic development of most countries. However, the relationship between energy consumption and economic growth remains a subject of ongoing debate within academia. Some studies suggest that energy consumption drives economic growth, while others indicate an inverse effect or no clear correlation. This study aims to assess the impact of energy consumption on economic growth in countries within the East Asia and Pacific region. Research data was collected from the World Development Indicators and the International Energy Agency for the period 2001–2024. The estimation method employed is Feasible Generalized Least Squares, which effectively controls for econometric issues such as heteroscedasticity and autocorrelation in panel data. The research findings reveal that energy consumption has a negative impact on economic growth in the East Asia and Pacific region. In other words, increasing energy consumption not only fails to boost growth but may also hinder economic development in this area. This finding carries a significant implication for policymakers: reducing energy consumption, coupled with enhancing energy efficiency and promoting a transition to cleaner energy sources, could be an appropriate strategy to ensure sustainable growth while mitigating negative impacts on the environment and long-term economic stability.