Stochastic convergence in per capita energy use in the EU-15 countries. The role of economic growth

Abstract

The European Green Deal initiatives refer to pollution reduction and management of climate changes. The aim of this paper is to analyze the stochastic convergence in per capita energy use in the EU-15 countries in the period 1970–2019. Besides the application of unit root tests with low power, this research proposes subsampling confidence intervals (asymmetrical and equal-tailed confidence intervals) to assess stochastic convergence. The approach based on confidence intervals provides additional information on the persistence of the energy use. 11 countries in the EU-15 registered a convergent pattern, while per capita energy use in Ireland and Spain was persistent. A divergent behaviour was observed in the case of the UK, Germany, Portugal and Italy. The three groups of countries were used in constructing an ANOVA/ linear Dependent Dirichlet Process (DDP) mixture model to show that economic growth is a significant cause for per capita energy use in countries with convergent behaviour. Moreover, EU membership enhances economic activity and also energy use. Specific policies are proposed for each group of countries to decline the per capita energy use.