Economic and environmental drivers of renewable energy transition in the EU

The current green agenda, the climate change, and sustainability frameworks are closely linked to the successful transition to renewable energy. The study purpose is to estimate the influence of economic and environmental drivers of renewable energy promotion in the EU-27, using the 2013–2021 data for member states. Breusch and Pagan Lagrangian multiplier test and Hausman specification test were performed to determine the proper model specification. Using random-effects GLS regression for selected data, the study found that the rise in the magnitude of the Land-Ocean Temperature Index by one unit contributes to an increase in renewable energy sources by 10-16 percentage points. The rise in natural gas prices in the EU by USD 10 per MMBtu is associated with an average growth of renewable energy sources by 2.1-2.6 percentage points and three percentage points for growth in renewable electricity. An increase in GDP per capita of USD 1,000 led to an average increase in renewable electricity by 0.2 percentage points. An increase in CO2 per capita by one ton is associated with an average decrease in renewable electricity by 0.85 percentage points. This study proves that the critical point of GDP per capita within the “economic growth/renewable energy” nexus when economic stimulus starts to decline was estimated at USD 121,227-148,623. Thus, for countries that have reached the break-even point in GDP per capita, the incentives for introducing renewable energy sources are reduced when the effect of wealth prevails over the impact of environmental awareness and responsibility. AcknowledgmentsThis paper is supported by a grant “Formation of Economic Mechanisms to Increase Energy Efficiency and Provide Sustainable Development of Renewable Energy in Ukraine’s Households” (No. 0122U001233), funded by the National Research Foundation of Ukraine.