A new hybrid approach to the impact of renewable energy consumption on economic growth: sectoral differences in European Union countries
Abstract
The current energy crisis has shown all states that energy from renewable sources can be a determining factor in the states’ sustainable development. Several papers have studied the relationship between renewable energy consumption and economic development, finding various situations, but there is no consensus. Thus, this study aims to first investigate the causal relationship between economic growth and total and sectoral renewable energy consumption (European Union and each Member State, for 2004–2020) by testing various linear and non-linear regressions to choose the fit model. Second, the investigation extends to analysing the impact of renewable energy consumption by sector on economic development. A hybrid approach is used, namely structural equation modelling and artificial neural networks. The study findings indicate the effect and the meaning (directly or inversely) exerted by the three sectoral components on economic growth, with different intensities from one country to another. There is a significant influence on the consumption of renewable energy in the heating and cooling sectors and transport on gross domestic product at the European Union level and for most member states. Based on the obtained results, a series of theoretical, practical, and political implications are provided.
Keyword : economic growth, granger causality, neural network artificial, renewable energy consumption, sector data, structural equation modelling
How to Cite
Mehedintu, A., & Soava, G. (2024). A new hybrid approach to the impact of renewable energy consumption on economic growth: sectoral differences in European Union countries. Journal of Business Economics and Management, 25(5), 849–871. https://doi.org/10.3846/jbem.2024.22000
This work is licensed under a Creative Commons Attribution 4.0 International License.
References
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Hair, J. F., Ringle, C. M., & Sarstedt, M. (2013). Partial least squares structural equation modeling: Rigorous applications, better results and higher acceptance. Long Range Planning, 46(1–2), 1–12. https://doi.org/10.1016/j.lrp.2013.01.001
Hinov, N., Dimitrov, V., & Vacheva, G. (2021). Model for vehicle to home system with additional energy storage for households. Electronics, 10(9), Article 1085. https://doi.org/10.3390/electronics10091085
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Khribich, A., Kacem, R. H., & Dakhlaoui, A. (2021). Causality nexus of renewable energy consumption and social development: Evidence from high-income countries. Renewable Energy, 169, 14–22. https://doi.org/10.1016/j.renene.2021.01.005
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Pejovic, B., Karadzic, V., Dragasevic, Z., & Backovic, T. (2021). Economic growth, energy consumption and CO2 emissions in the countries of the European Union and the Western Balkans. Energy Reports, 7, 2775–2783. https://doi.org/10.1016/j.egyr.2021.05.011
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Šikic, T. F. (2020). The impact of energy consumption on economic growth in developed and post-transition countries of European Union. Zbornik Radova Ekonomskog Fakulteta u Rijeci, 38, 475–497. https://doi.org/10.18045/zbefri.2020.2.475
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Ahmed, M. M., & Shimada, K. (2019). The effect of renewable energy consumption on sustainable economic development: Evidence from emerging and developing economies. Energies, 12(15), Article 2954. https://doi.org/10.3390/en12152954
Alam, M. M., & Murad, M. W. (2020). The impacts of economic growth, trade openness and technological progress on renewable energy use in organization for economic cooperation and development countries. Renewable Energy, 145, 382–390. https://doi.org/10.1016/j.renene.2019.06.054
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Anton, S. G., & Afloarei Nucu, A. E. (2020). The effect of financial development on renewable energy consumption. A panel data approach. Renewable Energy, 147(1), 330–338. https://doi.org/10.1016/j.renene.2019.09.005
Burke, P. J., Stern, D. I., & Bruns, S. B. (2018). The impact of electricity on economic development: A macroeconomic perspective. International Review of Environmental and Resource Economics, 12(1), 85–127. https://doi.org/10.1561/101.00000101
Chen, C., Pinar, M., & Stengos, T. (2020). Renewable energy consumption and economic growth nexus: Evidence from a threshold model. Energy Policy, 139, Article 111295. https://doi.org/10.1016/j.enpol.2020.111295
Chen, Y. Y., Mamon, R., Spagnolo, F., & Spagnolo, N. (2023). Sustainable developments, renewable energy, and economic growth in Canada. Sustainable Development, 31(4), 2950–2966. https://doi.org/10.1002/sd.2561
Doytch, N., & Narayan, S. (2021). Does transitioning towards renewable energy accelerate economic growth? An analysis of sectoral growth for a dynamic panel of countries. Energy, 235, Article 121290. https://doi.org/10.1016/j.energy.2021.121290
European Environment Agency. (2022). Primary and final energy consumption in Europe. https://www.eea.europa.eu/data-and-maps/indicators/final-energy-consumption-by-sector-13
El-Karimi, M. (2021). Investigating the causal linkage among economic growth and renewable and non-renewable energy consumption: Cases of Germany, UK and France. OPEC Energy Review, 45(4), 414–437. https://doi.org/10.1111/opec.12215
Directive 2009/28/EC. Directive 2009/28/EC of the European Parliament and of the Council of 23 April 2009 on the promotion of the use of energy from renewable sources and amending and subsequently repealing Directives 2001/77/EC and 2003/30/EC. https://eur-lex.europa.eu/legal-content/en/ALL/?uri=CELEX%3A32009L0028
European Commission. (2022). Heating and cooling. https://energy.ec.europa.eu/topics/energy-efficiency/heating-and-cooling_en
European Commission. (2021). Revision of the Renewable Energy Directive: The EU’s plan for a green transition. European Green Deal and Fit for 55 package. https://www.consilium.europa.eu/en/policies/green-deal/fit-for-55-the-eu-plan-for-a-green-transition/
Eurostat. (2022a). Complete energy balances. https://ec.europa.eu/eurostat/databrowser/view/nrg_bal_c/default/table?lang=en
Eurostat. (2022b). Energy consumption in households (europa.eu). https://ec.europa.eu/eurostat/statistics-explained/index.php?title=Energy_consumption_in_households
Fashina, O. A., Asaleye, A. J., Ogunjobi, J. O., & Lawal, A. I. (2018). Foreign aid, human capital and economic growth nexus: Evidence from Nigeria. Journal of International Studies, 11(2), 104–117. https://doi.org/10.14254/2071-8330.2018/11-2/8
Fayaz, M., & Kim, D. (2018). A prediction methodology of energy consumption based on deep extreme learning machine and comparative analysis in residential buildings. Electronics, 7(10), Article 222. https://doi.org/10.3390/electronics7100222
Furuoka, F. (2017). Renewable electricity consumption and economic development: New findings from the Baltic countries. Renewable And Sustainable Energy Reviews, 71, 450–463. https://doi.org/10.1016/j.rser.2016.12.074
Gong, W., Tang, L., Chen, Y., & Cheng, Z. (2023). Application of an artificial neural network model based on mineral composition to the prediction of physical and mechanical properties. Applied Sciences, 13, Article 7690. https://doi.org/10.3390/app13137690
Guliyev, H., & Tatoğlu, F. Y. (2023). The relationship between renewable energy and economic growth in European countries: Evidence from panel data model with sharp and smooth changes. Renewable Energy Focus, 46, 185–196. https://doi.org/10.1016/j.ref.2023.06.005
Hair, J. F., Black, W. C., Babin, B. J., & Anderson, R. E. (2010). Multivariate data analysis (7th ed.). Pearson.
Hair, J. F., Ringle, C. M., & Sarstedt, M. (2013). Partial least squares structural equation modeling: Rigorous applications, better results and higher acceptance. Long Range Planning, 46(1–2), 1–12. https://doi.org/10.1016/j.lrp.2013.01.001
Hinov, N., Dimitrov, V., & Vacheva, G. (2021). Model for vehicle to home system with additional energy storage for households. Electronics, 10(9), Article 1085. https://doi.org/10.3390/electronics10091085
Hu, L. T., & Bentler, P. M. (1999). Cutoff criteria for fit indexes in covariance structure analysis: Conventional criteria versus new alternatives. Structural Equation Modeling, 6(1), 1–55. https://doi.org/10.1080/10705519909540118
IEA. (2022). Energy and Climate Change. World Energy Outlook – The IEA’s outlook to 2040. https://www.woodmac.com/news/opinion/the-ieas-outlook-to-2040/
Inês, C., Guilherme, P. L., Esther, M. G., Swantje, G., Stephen, H., & Lars, H. (2020). Regulatory challenges and opportunities for collective renewable energy prosumers in the EU. Energy Policy, 138, Article 111212. https://doi.org/10.1016/j.enpol.2019.111212
Ivanovski, K., Hailemariam, A., & Smyth, R. (2021). The effect of renewable and nonrenewable energy consumption on economic growth: non-parametric evidence. Journal of Cleaner Production, 286, Article 124956. https://doi.org/10.1016/j.jclepro.2020.124956
Jia, H., Fan, S., & Xia, M. (2023). The impact of renewable energy consumption on economic growth: Evidence from countries along the belt and road. Sustainability, 15, Article 8644. https://doi.org/10.3390/su15118644
Khribich, A., Kacem, R. H., & Dakhlaoui, A. (2021). Causality nexus of renewable energy consumption and social development: Evidence from high-income countries. Renewable Energy, 169, 14–22. https://doi.org/10.1016/j.renene.2021.01.005
Kim, S., Choi, I., Kim, D., & Lee, M. (2020). Deep neural network based ambient airflow control through spatial learning. Electronics, 9(4), Article 591. https://doi.org/10.3390/electronics9040591
Komarnicka, A., & Murawska, A. (2021). Comparison of consumption and renewable sources of energy in European Union countries – sectoral indicators, economic conditions and environmental impacts. Energies, 14(12), Article 3714. https://doi.org/10.3390/en14123714
Krkošková, R. (2021). Causality between energy consumption and economic growth in the V4 countries. Technological and Economic Development of Economy, 27(4), 900–920. https://doi.org/10.3846/tede.2021.14863
Li, F., Lu, S., Cao, C., & Feng, J. (2021). Operation optimization of regional integrated energy system considering the responsibility of renewable energy consumption and carbon emission trading. Electronics, 10(21), Article 2677. https://doi.org/10.3390/electronics10212677
Mohsin, M., Naseem, S., Sarfraz, M., & Azam, T. (2022). Assessing the effects of fuel energy consumption, foreign direct investment and GDP on CO2 emission: New data science evidence from Europe & Central Asia. Fuel, 314, Article 123098. https://doi.org/10.1016/j.fuel.2021.123098
Mughal, N., Arif, A., Jain, V., Chupradit, S., Shabbir, M. S., Ramos-Meza, C. S., & Zhanbayev, R. (2022). The role of technological innovation in environmental pollution, energy consumption and sustainable economic growth: Evidence from South Asian economies. Energy Strategy Reviews, 39, Article 100745. https://doi.org/10.1016/j.esr.2021.100745
Nguyen, K. H., & Kakinaka, M. (2019). Renewable energy consumption, carbon emissions, and development stages: some evidence from panel cointegration analysis. Renewable Energy, 132, 1049–1057. https://doi.org/10.1016/j.renene.2018.08.069
Odugbesan, J. A., & Rjoub, H. (2020). Relationship among economic growth, energy consumption, CO2 emission, and urbanization: Evidence from MINT Countries. SAGE Open, 10, 1–15. https://doi.org/10.1177/2158244020914648
Ooi, K. B., & Tan, G. W. H. (2016). Mobile technology acceptance model: An investigation using mobile users to explore smartphone credit card. Expert Systems with Applications, 59, 33–46. https://doi.org/10.1016/j.eswa.2016.04.015
Pan, X., Shao, T., Zheng, X., Zhang, Y., Ma, X., & Zhang, Q. (2023). Energy and sustainable development nexus: A review. Energy Strategy Reviews, 47, Article 101078. https://doi.org/10.1016/j.esr.2023.101078
Pejovic, B., Karadzic, V., Dragasevic, Z., & Backovic, T. (2021). Economic growth, energy consumption and CO2 emissions in the countries of the European Union and the Western Balkans. Energy Reports, 7, 2775–2783. https://doi.org/10.1016/j.egyr.2021.05.011
Radmehr, R., Henneberry, S. R., & Shayanmehr, S. (2021). Renewable energy consumption, CO2 emissions, and economic growth nexus: A simultaneity spatial modeling analysis of EU countries. Structural Change and Economic Dynamics, 57, 13–27. https://doi.org/10.1016/j.strueco.2021.01.006
Šikic, T. F. (2020). The impact of energy consumption on economic growth in developed and post-transition countries of European Union. Zbornik Radova Ekonomskog Fakulteta u Rijeci, 38, 475–497. https://doi.org/10.18045/zbefri.2020.2.475
Simionescu, M., Strielkowski, W., & Tvaronavičiene, M. (2020). Renewable energy in final energy consumption and income in the EU-28 countries. Energies, 13(9), Article 2280. https://doi.org/10.3390/en13092280
Ullman, J. B. (2001). Structural equation modelling. In B. G. Tabachnick, & L. S. Fidell (Eds.), Using multivariate statistics (4th ed.). Pearson Education.
Xie, P., Zhu, Z., Hu, G., & Huang, J. (2023). Renewable energy and economic growth hypothesis: Evidence from N-11 countries. Economic Research-Ekonomska Istraživanja, 36(1), Article 2121741. https://doi.org/10.1080/1331677X.2022.2121741