A comparative study of sectoral renewable energy consumption and GDP in the U.S.: Evidence from a threshold approach

The debate about the threshold effect of sectoral renewable energy consumption on economic growth has attracted extreme attention, but only limited evidence supports this issue. Therefore, the objective of this paper is to study the non-linear relationship between economic growth, capital, labor and sectoral renewable energy consumption for the case of the United States during the period 1981Q1 and 2021Q1. Using the threshold detection method proposed by Hansen (2002), the effect of sectoral renewable energy consumption on economic growth is positive and significant only if the electric power, industrial, residential, commercial, and transport sectors exceed a renewable energy consumption threshold lnREC >7.095; lnREC >6.138; lnREC >4.897; lnREC >3.212; and lnREC >2.849, respectively. Indeed, for the U.S. to achieve positive economic growth from its renewable energy investments, it must exceed a certain threshold of renewable energy consumption for each sector. However, if the United States use renewable energy below a certain threshold, the effect of sectoral renewable energy consumption on economic growth is negative. These results have important implications for both policymakers and investors.