Energy for sustainable growth: The interactive effects of education and trade in G7 economies

This study investigates the long-run and short-run relationships between economic growth, renewable energy consumption, education, trade openness, and energy consumption in G7 economies over the period 2002–2022. Using panel cointegration techniques (FMOLS, DOLS, and VECM), we find that all variables are statistically significant in explaining GDP dynamics. A 1% increase in renewable energy consumption raises GDP by up to 0.08%, while trade openness and labor force expansion have the strongest elasticities – 0.43 and 1.05, respectively. Education contributes positively to growth (0.05-0.13), confirming the role of advanced human capital in supporting innovation and green transformation. In contrast, higher energy intensity reduces GDP (-0.01 to -0.14) and emphasizes the need for efficiency improvements. The key novel result is the presence of the interaction effects of education and trade in G7 economies as amplifiers of renewable energy deployment (0.03 to 0.07). This study identified these interaction mechanisms using second-generation panel estimators to be robust with cross-sectional dependence and heterogeneous country responses. Granger causality tests reveal bidirectional links between renewable energy and GDP, as well as between education and GDP. Robustness analysis using a panel GMM estimator confirms the stability of the results. These results identify key transmission channels of sustainable growth and provide valuable country-specific policy recommendations: increased investments in renewable energy, supporting households, education, and trade policies to promote sustainable economic growth in G7 nations.