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Energy efficiency and Jevons' paradox in OECD countries: policy implications leading toward sustainable development

Abstract:

Energy consumption is defined as one of the main determinants of environmental degradation. Therefore, this issue becomes one of the main points of debate to achieve sustainable development. This research examines how a set of economic factors determine the energy consumption in Organization for Economic Cooperation and Development countries, for which second-generation econometric methods have been used that control cross-sectional dependence issues. Therefore, the results, using nonlinear methods, suggest the presence of Jevons' paradox in these countries. However, under the Jevons' paradox scenario, technological innovation becomes a factor that mitigates energy demand. Contrary to the foreign direct investment that contributes significantly to the increase in energy consumption, from the results found, some policy implications are derived in the framework of achieving sustainable development.