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European Industrial Energy Intensity: Innovation, Environmental Regulation, and Price Effects

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  • Victor Ajayi and David Reiner

Abstract

We investigate the direct role of technological innovation and other factors influencing industrial energy intensity across 17 EU countries over 1995ý2009. We develop an innovative industry-level patent dataset and find compelling evidence that patent stock negatively influences industrial energy intensity. In particular, we find a much stronger effect of patent stock on energy-intensive industries with an estimated coefficient of ý0.138 which almost double that of less energy-intensive industries (estimated at ý0.085). While our results show that energy price remains the major determinant of energy intensity, the chemicals industry, which is not covered by the EU Emissions Trading Scheme (ETS) during the sample period, appears more susceptible to energy prices relative to other energy-intensive industries that are covered by the EU ETS. Exploring regional differences in carbon taxation, we find a significant decline in energy intensity in Northern Europe owing to the carbon tax policy implemented in the early 1990s across the Nordic countries.

Suggested Citation

  • Victor Ajayi and David Reiner, 2020. "European Industrial Energy Intensity: Innovation, Environmental Regulation, and Price Effects," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 105-128.
    • Handle: RePEc:aen:journl:ej41-4-ajayi
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    Cited by:

    1. Chuku Chuku & Victor Ajayi, 2024. "Growing green: enablers and barriers for Africa," Journal of Productivity Analysis, Springer, vol. 61(3), pages 195-214, June.
    2. Kunkel, S. & Neuhäusler, P. & Matthess, M. & Dachrodt, M.F., 2023. "Industry 4.0 and energy in manufacturing sectors in China," Renewable and Sustainable Energy Reviews, Elsevier, vol. 188(C).
    3. Pinar, Mehmet, 2024. "Convergence in renewable energy innovation and factors influencing convergence club formation," Renewable Energy, Elsevier, vol. 220(C).
    4. Zhong Wang & Mingyu Wu & Shixiang Li & Changji Wang, 2021. "The Effect Evaluation of China’s Energy-Consuming Right Trading Policy: Empirical Analysis Based on PSM-DID," Sustainability, MDPI, vol. 13(21), pages 1-16, October.
    5. Tao Lin & Lijun Wang & Jingbo Wu, 2022. "Environmental Regulations, Green Technology Innovation, and High-Quality Economic Development in China: Application of Mediation and Threshold Effects," Sustainability, MDPI, vol. 14(11), pages 1-20, June.
    6. Okwoche, Princewill & Ščasný, Milan & Karimu, Amin, 2025. "Informal economies and energy efficiency: Empirical evidence from African countries," Renewable and Sustainable Energy Reviews, Elsevier, vol. 214(C).
    7. Carfora, A. & Pansini, R.V. & Scandurra, G., 2021. "The role of environmental taxes and public policies in supporting RES investments in EU countries: Barriers and mimicking effects," Energy Policy, Elsevier, vol. 149(C).
    8. Wang, En-Ze & Lee, Chien-Chiang & Li, Yaya, 2022. "Assessing the impact of industrial robots on manufacturing energy intensity in 38 countries," Energy Economics, Elsevier, vol. 105(C).
    9. Wang, Kaike & Su, Xuewei & Wang, Shuhong, 2023. "How does the energy-consuming rights trading policy affect China's carbon emission intensity?," Energy, Elsevier, vol. 276(C).
    10. Rahko, Jaana, 2025. "Vertical spillovers and the energy intensity of European industries," Energy Economics, Elsevier, vol. 141(C).
    11. Li, Yaya & Cobbinah, Joana & Abban, Olivier Joseph & Veglianti, Eleonora, 2023. "Does green manufacturing technology innovation decrease energy intensity for sustainable development?," Economic Analysis and Policy, Elsevier, vol. 78(C), pages 1010-1025.
    12. Chuku Chuku & Victor Ajayi, 2022. "Working Paper 363 - Growing Green: Enablers and Barriers for Africa," Working Paper Series 2489, African Development Bank.
    13. Wei Wang & Hailin Chen, 2023. "Extrusion Effect or Promotion Effect? The Effect of Environmental Regulation on Enterprise Green Innovation," IJERPH, MDPI, vol. 20(3), pages 1-18, January.

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    JEL classification:

    • F0 - International Economics - - General

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