Insights from the Nexus between Economic Growth and Green Energy

Abstract

The research aims to provide a new approach and insights into the nexus between economic growth and green energy by analyzing their direct, indirect, and total linkages at the European Union level (EU-27). To this end, an advanced empirical analysis performed by network analysis, as Gaussian Graphical Models, is carried out for the period 2012-2022 The originality of network analysis lies in the fact that it allows the simultaneous visualization of all the links between variables in a complex system of dependencies. The novelty of the paper is twofold: first, it addresses the issue of renewable energy in an innovative way that captures three key stages of the EU policy (renewables’ capacity; share of renewable energy; and final consumption); second, it advances the nexus analysis by considering technological investments. Empirical results have validated the vital role of increasing the share of renewable energy in achieving sustainability and reducing greenhouse gas emissions. Also, the Research & Development and Gross Value added in environmental goods and services sector are found to positively influence sustainable development. The results are useful for policymakers and managers of organizations to understand the relationships between these variables better and thus, achieve climate neutrality.