Energy Consumption and Economic Growth Nexus: Insights from EU Member States

The aim of this paper is to examine possible correlations between economic growth and energy consumption in the European Union (EU27) member economies for the 1995-2021 interval. It searches for some short/long term relationships of these through a panel type model, based on the Cobb-Douglas neoclassic production function. Reference examples in the literature and tests applied for unit roots and cointegration determine our option for an autoregressive distributed lag (ARDL) model able to identify both common coefficients of long-term relationship between variables and individual (specific to each EU member country) coefficients on short-term relationships. The per capita gross domestic product (GDP), as endogenous variable, is facing three exogenous here chosen, that are: labor force participation rate (Labor); fixed capital formation (GFCF) and the variable of interest primary per capita energy consumption (PEC). Our results indicate a constant per capita GDP growth concomitant with the energy consumption reduction - both these on aggregate in the EU region - thus suggesting a possible decoupling of economic growth from energy consumption for recent years. But such a possibility wouldn’t necessarily deny the existence of a long-term relationship between these two factors. These results come to be completed by the ones of each individual EU member country, and so each one of these will be found with its, existing or not, short- and long-term relationships between the model variables.