Fossil fuels are major sources of energy, and have several advantages over
other primary energy sources. Without extensive dependence on fossil fuels, it
is questionable whether our economic prosperity can continue or not. This paper
analyzes cointegration and causality between fossil fuel consumption and
economic growth in the world over the period 1971--2008. The estimation results
indicate that fossil fuel consumption and GDP are cointegrated and there exists
long-run unidirectional causality from fossil fuel consumption to GDP. This
paper also investigates the nexus between nonfossil energy consumption and GDP,
and shows that there is no causality between the variables. The conclusions are
that reducing fossil fuel consumption may hamper economic growth, and that it
is unlikely that nonfossil energy will substantially replace fossil fuels. This
paper also examines causal linkages between the variables using a trivariate
model, and obtains the same results as those from the bivariate model.