Convergence of renewable energy consumption in the EU-15: evidence from stochastic and club convergence tests.

Abstract

This paper investigates the convergence of per capita renewable energy consumption across 15 core EU member countries over the period 1990-2018. In addition to the traditional convergence tests, this paper employs a Lagrange multiplier (LM)-based panel unit root test that allows for two endogenously determined structural breaks to test for the stochastic convergence. Given the shortcomings of stochastic convergence tests in light of the possibility of multiple equilibria associated with groups of countries following different convergence paths, the club convergence algorithm is also employed. Traditional cross-sectional tests indicate that both β- and σ-convergence of per capita renewable energy consumption exist across the EU-15 countries. Moreover, the results of stochastic convergence tests reveal that relative per capita renewable energy consumption is converging across the sampled countries over the sample period. However, the club convergence test results suggest the rejection of full panel club convergence and the presence of a certain number of clubs for the variable of interest.