Determinants of sustainable energy demand in the European economic area: Evidence from the PMG-ARDL model

Abstract

This research examines the effect of financial advancement, technological innovations, economic freedom, GDP, and pollution of the environment on the utilization of sustainable energy in the European Economic Area (EEA) which has the highest level of economic freedom (EF). A PMG/ARDL dynamic panel technique and the CS-ARDL tests were used to analyze the variables for the 1996–2018 period. The outcomes confirm that the major role is played by the financial advancement in increasing the utilization of sustainable energy. Environmental pollution is diminishing with increasing sustainable energy utilization. Positive associations exist among technological innovations, EF, GDP, and the utilization of sustainable energy. The paper makes important suggestions for these states in the recommendations section. The major implications are to implement financially oriented policies to boost sustainable energy utilization and translate them into a practical system to support institutions' green development. Also, it is suggested to direct foreign and domestic capital to sustainable energy projects by expanding and reforming the financial sector.