Renewable energy in final energy consumption and income in the EU-28 countries

Abstract

The deployment of renewable energy sources (RES) is considered to be an important objective for the energy sector in the European Union (EU). The EU Directive adapted in 2009 fixed mandatory national targets for the use of renewable energy in transport as well as for the share of RES in the gross final energy consumption. Contrary to previous studies, this paper does not examine the link between the RES and economic growth but rather focuses on real gross domestic product (GDP) and the implementation of national renewable energy targets. We employ panel data models for the case of the EU-28 countries covering the period between 2007 and 2017 that yield a low and positive relationship between the impact of GDP per capita and the share of RES in the final consumption. Our results show that there is a significant causality only from real GDP per capita to the share of renewable energy in final consumption, marking the potential of developed countries to consume more RES. We list some groups of countries according to these variables using a cluster analysis approach. Starting from the proposed panel data models, we constructed the scenarios for the 2020 for various shares of RES and different EU Member States. Overall, it appears that more attention should be attributed to policy proposals in which funding opportunities would be dependent on the achievements of national targets and economic benefits should be given to countries with very good performance in achieving high shares of renewable energy in their final energy consumption.