Does biomass affect economic growth in Emerging European countries? A note from a dynamic panel model

The impact of biomass on economic growth has recently been debated in empirical literature, with biomass (a component of renewable energy sources) being identified as a key driver of economic growth. The paper empirically explores this link for 11 Emerging EU Countries (EEU_11) and 6 emerging non-EU countries (NEU_6) for two periods: 1998-2019 (unaffected by the pandemic) and 1998-2024 (impacted by the COVID-19 crisis) using dynamic panel models (including Pesaran et al. (1999)'s Pooled Mean Group estimator) and non-linear panel models (such as Gonzales et al. (2017)) for robustness checks. When a linear relationship is found, it appears that biomass has a beneficial effect on economic growth, mainly, in the long run (validating the feedback hypothesis). When analyzing the hypothesis of non-linearities associated to the biomass-growth nexus, the relationship takes the form of an inverted U in the long-run (meaning that biomass has a positive effect on economic growth until a certain threshold is reached, beyond which the association turns negative), whereas this relationship does not hold in the short run. Results also show that biomass energy is a source of non-linearity for the two groups of countries. In terms of policy implications, governments should prioritize efficient investment projects to boost economic growth and expand the renewable energy industries, particularly the modern biomass sectors.