Assessment of country institutional factor on sustainable energy target achievement in European Union

Abstract

This study examines causality relation between the quality of national institutional frameworks designed to ensure higher energy efficiency and the distance to the achievement of the EU Commission targets in terms of energy consumption, using a panel of 21 EU member states. Through panel unit root tests and an estimated VAR model, our results reveal that the quality of a nation’s institutional and economic energy efficiency framework does not significantly influence the gap between annual energy consumption and related EU targets, as prescribed by the energy efficiency EU Directives. However, the results show a bi-directional causality relationship suggests that the nation’s institutional framework on energy efficiency should be improved. According to the impulse response function, this relationship is more related to a short-run perspective. Hence, a strong correlation exists between the level of achieving the reduction targets on energy consumption and the level of gas emissions. Our findings further reveal that the level of reported GHCs significantly influences national regulations and strategies for gas emission reductions. This research highlights the importance of each EU member state creating an appropriate legislative and institutional framework that promotes energy efficiency.