Toward a sustainable economic development in the EU member states : The role of energy efficiency-intensity and renewable energy

Abstract

While aiming to reach its 20% energy efficiency target for 2020 and subsequently reaching at least 32.5% by 2030, the European Union (EU) countries are consistently encouraged to implement the bloc's energy efficiency directives of 2012/27/EU and the (EU) 2018/2002. Without sacrificing existing energy standards and environmental quality, the EU has consistently favored behavioral and economic changes that are capable of increasing energy efficiency. In view of this motivation, this study examines the impact of energy efficiency on economic growth in 21 EU member countries over the 1995–2016 period. Importantly, the study examined both the regional and country-specific impacts of energy intensity, energy dependency, and renewable energy utilization on economic expansion. With a respective elasticity of 0.94, 0.17, and 0.01 by the MG (Mean Group) estimator, we found that energy efficiency, renewable energy utilization, and energy dependency positively trigger economic expansion in the region. This result does not only provide a desirable economic outlook for the EU countries, the observation further offers a positive feedback on the bloc's drive for environmental sustainability. The empirical results obtained from panel causality test indicate that there is a bilateral Granger causality from economic growth to energy efficiency, energy intensity, and renewable energy. Moreover, the result provides that energy efficiency, energy intensity, energy dependency, and renewable energy utilization exhibits a different degree of economic impact across the sections of examined EU countries. In general, the study captures a policy reflection of the economic and environmental sustainability status and outlook of the EU countries.