Researchers Deka, Özdeşer and Seraj from Economics Department, Near East University have conducted a comprehensive study examining the relationship between primary energy supply and economic growth in the European Union (EU). The study, spanning from 1990 to 2019 and encompassing data from 27 EU countries, employs advanced statistical techniques including Dynamic Generalised Method of Moments, Fully Modified Ordinary Least Squares, and Dynamic Ordinary Least Squares.
Unlike previous research, this study introduces the concept of “effective capital,” considering the interaction between energy and capital as a novel aspect. Findings reveal that factors such as carbon emissions, renewable energy, capital, effective capital, and population size have a significant positive impact on GDP in EU-27 countries. Interestingly, while primary energy supply exhibits a negative significant effect on GDP in some analyses, the Dynamic Ordinary Least Squares technique suggests a significant positive effect.
The study emphasizes the importance of labor force, capital, renewable energy, and effective capital as drivers of economic growth. It suggests caution regarding non-renewable energy use due to its detrimental effects on both economic growth and carbon emissions. The study also highlights the critical role of energy in conjunction with capital in promoting economic growth, advocating for the adoption of sophisticated energy sources such as renewable energy to power production processes.
However, the study acknowledges its limitations, such as the exclusion of other drivers of economic growth like human capital and technological progress. Despite these limitations, the robust findings derived from a large panel dataset and the employment of advanced statistical techniques contribute significantly to the understanding of the energy-economic growth nexus in the EU. The study’s findings have implications for policy formulation, emphasizing the importance of transitioning towards renewable energy sources for sustainable economic development.
For future research, the study suggests extending the analysis to developing countries and emerging economies, while also considering additional explanatory variables such as human capital and technological progress. Overall, the study provides valuable insights into the complex relationship between energy supply and economic growth, paving the way for further exploration in this field.
More Information:
https://www.sciencedirect.com/science/article/pii/S0960148123013654
