Economic Growth and a Qualitative Shift in the Composition of Energy Use: Which of the Energy Ladder or Energy Stacking Models is the Most Suitable in the Long Run?
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Abstract
At the household level, numerous studies in developing countries have demonstrated that the energy ladder hypothesis does not hold, with energy stacking remaining the prevailing pattern of fuel choice. This paper extends the debate to the macroeconomic level, examining whether national energy transitions in developed and developing economies align more closely with the energy ladder or energy stacking framework. Using data from the World Development Indicators (2022) and the World Energy and Climate Statistics Yearbook (2022), and applying an ARDL model, we assess the dynamics of income growth and energy use. Our results indicate that, with the exception of Canada, the energy ladder hypothesis is supported in developed economies, where rising incomes are associated with a shift toward cleaner energy sources. By contrast, in developing countries, energy stacking persists as the dominant pattern. These findings suggest that, apart from Canada, developed economies can achieve environmental sustainability alongside economic growth. However, in African economies and in Canada, growth alone does not guarantee sustainable energy use. For these cases, targeted environmental regulations and policy interventions are essential to advance sustainable economic development.
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