Energy-Growth Nexus in European Union Countries During the Green Transition

This study investigates the relationship between economic growth and energy con-sumption—both renewable and non-renewable—in European Union countries during the green transition. Using a panel dataset of 28 EU countries from 1995 to 2021, we employ econometric techniques, including the Westerlund cointegration test, to assess long-term equilibrium relation-ships, accounting for cross-sectional dependence and slope heterogeneity. The results indicate that, while both renewable and non-renewable energy consumption are associated with economic growth, their roles differ. Renewable energy consumption shows a positive but less robust rela-tionship with GDP, with limited evidence of a predictive impact on economic growth. In contrast, non-renewable energy consumption demonstrates a more robust bidirectional causality with GDP, indicating a more intertwined relationship with economic growth during the study period. Our results have significant policy recommendations, indicating that promoting renewable ener-gy sources does not hinder economic growth. Moreover, such promotion has the potential to con-tribute substantially to economic growth in the future. Therefore, in addition to other crucial ben-efits, such as increased energy security, the development of renewable energy sources does not pose a threat to the economy. This is particularly relevant as many EU countries, including Po-land, Romania, Hungary, Bulgaria, Slovakia, and Lithuania, still have underdeveloped renewa-ble energy sectors.