Fossil & renewable energy consumption, GHGs (greenhouse gases) and economic growth: Evidence from a panel of EU (European Union) countries

Abstract

Recently a great number of empirical research studies have been conducted on the relationship between certain indicators of environmental degradation and income. The EKC (Environmental Kuznets Curve) hypothesis has been tested for various types of environmental degradation. The EKC hypothesis states that the relationship between environmental degradation and income per capita takes the form of an inverted U shape. In this paper the EKC hypothesis was investigated with regards to the relationship between carbon emissions, income and energy consumption in 16 EU (European Union) countries. We conducted panel data analysis for the period of 1990–2008 by fixing the multicollinearity problem between the explanatory variables using their centered values. The main contribution of this paper is that the EKC hypothesis has been investigated by separating final energy consumption into renewable and fossil fuel energy consumption. Unfortunately, the inverted U-shape relationship (EKC) does not hold for carbon emissions in the 16 EU countries. The other important finding is that renewable energy consumption contributes around 1/2 less per unit of energy consumed than fossil energy consumption in terms of GHG (greenhouse gas) emissions in EU countries. This implies that a shift in energy consumption mix towards alternative renewable energy technologies might decrease the GHG emissions.