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This study investigates the relationship between energy consumption, environmental degradation and economic growth for high and middle-income countries using spatial panel and non-spatial panel regression based on yearly data from 2002-2013 (N=14, T=12). The empirical results suggest that spatial panel models are more appropriate than the non-spatial panel model for high-income countries data. Energy consumption provides a significant impact on economic growth and environmental degradation in middle-income countries. The results are consistent with most of the previous studies and reveal useful information about the spatial effect in the estimated models. This provides a better understanding of the inter-relationship among the variables in different groups of countries to attain sustainable development. [ABSTRACT FROM AUTHOR]