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Convergence of renewable energy consumption in the EU-15: evidence from stochastic and club convergence tests

Abstract

This paper investigates the convergence of per capita renewable energy consumption across 15 core EU member countries over the period 1990–2018. In addition to the traditional convergence tests, this paper employs a Lagrange multiplier (LM)–based panel unit root test that allows for two endogenously determined structural breaks to test for the stochastic convergence. Given the shortcomings of stochastic convergence tests in light of the possibility of multiple equilibria associated with groups of countries following different convergence paths, the club convergence algorithm is also employed. Traditional cross-sectional tests indicate that both β- and σ-convergence of per capita renewable energy consumption exist across the EU-15 countries. Moreover, the results of stochastic convergence tests reveal that relative per capita renewable energy consumption is converging across the sampled countries over the sample period. However, the club convergence test results suggest the rejection of full panel club convergence and the presence of a certain number of clubs for the variable of interest.

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Notes

  1. 1.

    An energy resource is called renewable when it is generated from natural processes. Examples for renewable energy are solar, geothermal heat, wind, tides, water, and various forms of biomass. The main feature of this energy source is that it cannot be exhausted and is constantly renewed.

  2. 2.

    Paris Agreement, also called Paris Climate Agreement, was adopted in December 2015, which is aimed at reducing the emission of gases that contribute to global warming. The agreement has been signed by 197 countries and ratified by 185 as of January 2019.

  3. 3.

    In December 2018, the revised Renewable Energy Directive (EC 2019) entered into force and raised the overall EU target for renewable energy sources consumption by 2030 to 32%. Furthermore, it also mandates member countries to require fuel suppliers to supply a minimum of 14% of the energy consumed in road and rail transport by 2030 as renewable energy.

  4. 4.

    The main disadvantage of the traditional tests is that they do not allow an individual growth path of variables of interest across countries.

  5. 5.

    The technical details of the test could be found in Im et al. (2005), Lee et al. (2012), and Lee and Tieslau (2019).

  6. 6.

    The main advantages of this test are as follows: (a) it can overcome the problem of biased and inconsistent estimation caused by omitted variables and endogeneity in traditional convergence tests; (b) it does not impose any particular assumptions regarding the non-stationarity of the variables and allows for cases were individual series may be transitionally divergent; (c) if the sample does not converge, it can be used further to test the existence of club convergence or individual divergent group.

  7. 7.

    The Phillips and Sul (2007) algorithm was first implemented in GAUSS. The later versions of it have been produced in R and Stata Schnurbus et al. (2017) and Du (2017), respectively. In this study, we use Du (2017) version of the code.

  8. 8.

    After May 2004, the number of member countries in the European Union increased to 28. However, we dropped the new members due to the data availability.

  9. 9.

    We also use Blundell and Bond (1998) GMM approach to estimate the model. The regressions results are very similar. They are not reported but available from the authors upon request.

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Correspondence to Adnan Kasman.

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Appendix

Appendix

Fig. 1.
figure1

Renewable energy consumption per capita (in oil tonnes equivalent)

Fig. 2.
figure2

The share renewable energy consumption in primary energy consumption

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Kasman, A., Kasman, S. Convergence of renewable energy consumption in the EU-15: evidence from stochastic and club convergence tests. Environ Sci Pollut Res 27, 5901–5911 (2020). https://doi.org/10.1007/s11356-019-07378-y

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Keywords

  • Renewable energy consumption
  • Stochastic convergence
  • Club convergence
  • EU-15 countries

JEL classification

  • C22
  • C23
  • E4
  • O47