TESTING FOR GRANGER CAUSALITY BETWEEN RENEWABLE ENERGY CONSUMPTION, GDP, CO2 EMISSION, AND FOSSIL FUEL PRICES IN THE USA

This paper examines the causal relationship between renewable energy consumption, GDP, CO2 emission and fossil fuel prices.Johensen cointegration method, Vector Error Correction Method, and Granger Causality are used for analysis.The data is taken from the US Energy Information Administration, and World Bank, World Development Indicators, 2012, covering the US data from 1949 to 2011.The results suggest that Fossil Fuel Price has a long term relationship with CO2, and Renewable energy consumption.In the short term, we found bidirectional causality between CO2 emission and Fossil Fuel prices.However, the presence of uni-directional causality seems to run from GDP as well as renewable energy to fossil fuel prices.