Abstract
The aim of the paper is to examine the long-term relationship between economic complexity, energy consumption structure, and greenhouse gas emission, within a panel of European Union countries and two subpanels: (i) European economies with higher economic complexity and (ii) European economies with a lower level of economic complexity. Taking into consideration the heterogeneity among European countries, the heterogeneous panel technique is used, including panel estimation through fully modified least squares (FMOLS) and dynamic ordinary least squares (DOLS). The empirical findings indicate a long-term equilibrium relationship between economic complexity, energy consumption structure and greenhouse gas emission within all three panels. Economic complexity and energy consumption structure have a statistically significant impact on greenhouse gas emission within all panels, but the influence is higher within the subpanel of countries with a lower level of economic complexity, suggesting a higher risk of pollution as the economic complexity grows and as the energy balance inclines in favor of non-renewable energy consumption. Our paper suggests that the economic complexity is a variable that must be taken into consideration when national economic and energy policies are shaped. Finally, policy implications for each panel of countries are discussed.
Highlights
Our paper investigates the effects of economic complexity on greenhouse gas emission in 25 European Union (EU) countries and, in two subpanels of countries with higher respectively lower level of economic complexity, over the period 1995–2016
The speed of reducing pollutant activities is higher in the first subpanel of 15 EU countries with higher economic complexity, suggesting differences in energy efficiency and effectiveness of energy policy mix between the two subpanels
The impact of energy consumption structure on air emissions is higher in the ten EU countries with lower economic complexity, suggesting the need to give greater priority on policies aiming to mitigate the use of energy derived from fossil fuels
Summary
All EU countries have assumed the commitment to sustain the goals of reducing GHG emissions by 20% compared to the 1990 levels, and increasing energy efficiency by 20% within the frame of the Europe 2020 strategy, under the flagship of “Resource Efficient Europe” (decoupling economic growth from the use of resources, supporting the shift towards a low-carbon economy, increasing the use of renewable energy sources, modernizing the transport sector and promoting energy efficiency) [1]. A reduction in GHG emissions by 40% below the 1990 levels, together with other goals related to renewable energy and energy efficiency in the EU is included in the Energy Roadmap 2050 initiative [3], which was reinforced in 2014 [4] This initiative proposes to ensure the competitiveness and security of the energy supply, and to support the transition to a low-carbon economy and the decarbonization of the energy system by boosting innovation in energy technology
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