IDEAS home Printed from https://ideas.repec.org/a/eee/energy/v320y2025ics0360544225009922.html

Insufficiency of renewable energy. How do the transition to green energy economies and foreign direct investment affect energy poverty in Europe?

Author

Listed:
  • Soto, Gonzalo H.
  • Nghiem, Xuan-Hoa
  • Martinez-Cobas, Xavier

Abstract

We analyze the relationships among the main European energy policies within the context of the green transition and foreign direct investment (FDI) in relation to energy poverty. By employing robust estimators, we determine that there is an insufficient effect of renewable energy penetration in the European Union from 2004 to 2022. This trend is further confirmed by the analysis of energy productivity. Abrupt increases in income levels or demographic dispersion also contribute to the rise of energy poverty. On the other hand, higher overall energy penetration reduces energy poverty. Additionally, both inward foreign direct investment from eurozone countries and outward foreign direct investment to eurozone countries help alleviate the pressure on energy demand, thereby reducing energy poverty.

Suggested Citation

  • Soto, Gonzalo H. & Nghiem, Xuan-Hoa & Martinez-Cobas, Xavier, 2025. "Insufficiency of renewable energy. How do the transition to green energy economies and foreign direct investment affect energy poverty in Europe?," Energy, Elsevier, vol. 320(C).
    • Handle: RePEc:eee:energy:v:320:y:2025:i:c:s0360544225009922
    DOI: 10.1016/j.energy.2025.135350
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0360544225009922
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.energy.2025.135350?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    References listed on IDEAS

    as
    1. Wang, Wenhao & Xu, Tao & Liu, Xiaoyi & Sun, Yongkun, 2023. "FDI inflows and income inequality: A Schumpeterian economic growth," International Review of Economics & Finance, Elsevier, vol. 83(C), pages 805-820.
    2. Li, Xiuqing & Xiao, Liming, 2024. "The impact of urban green business environment on FDI quality and its driving mechanism: Evidence from China," World Development, Elsevier, vol. 175(C).
    3. Li, Fengchun & Wu, Siying, 2023. "Impacts of home country's institutional environment on OFDI dual margin," International Review of Economics & Finance, Elsevier, vol. 87(C), pages 54-67.
    4. Pereira, Diogo Santos & Marques, António Cardoso, 2023. "How do energy forms impact energy poverty? An analysis of European degrees of urbanisation," Energy Policy, Elsevier, vol. 173(C).
    5. Xiong, Su & Luo, Rong, 2023. "Investigating the relationship between digital trade, natural resources, energy transition, and green productivity: Moderating role of R&D investment," Resources Policy, Elsevier, vol. 86(PB).
    6. Zhao, Jinjing & Pan, Jie & Xie, Xiangwei & Su, Miao, 2024. "Green outward foreign direct investment and host country environmental effects: The home country's carbon emission reduction system is crucial," Energy, Elsevier, vol. 290(C).
    7. Baltagi, Badi H. & Feng, Qu & Kao, Chihwa, 2012. "A Lagrange Multiplier test for cross-sectional dependence in a fixed effects panel data model," Journal of Econometrics, Elsevier, vol. 170(1), pages 164-177.
    8. Zhou, Kui & Wang, Yinsu & Wang, Huan & Tan, Jing, 2024. "Does China's outward foreign direct investment alleviate energy poverty in host countries? Evidence from countries along the belt and road initiative," Renewable Energy, Elsevier, vol. 223(C).
    9. Percebois, Jacques & Pommeret, Stanislas, 2021. "Efficiency and dependence in the European electricity transition," Energy Policy, Elsevier, vol. 154(C).
    10. Zhang, Zhuo & Zhao, Yongliang & Cai, Haiya & Ajaz, Tahseen, 2023. "Influence of renewable energy infrastructure, Chinese outward FDI, and technical efficiency on ecological sustainability in belt and road node economies," Renewable Energy, Elsevier, vol. 205(C), pages 608-616.
    11. Soto, Gonzalo H. & Martinez-Cobas, Xavier, 2025. "Does outward foreign direct investment and the green transition affect renewable energy penetration among European Union countries?," Renewable Energy, Elsevier, vol. 241(C).
    12. So Im, Kyung & Ahn, Seung C. & Schmidt, Peter & Wooldridge, Jeffrey M., 1999. "Efficient estimation of panel data models with strictly exogenous explanatory variables," Journal of Econometrics, Elsevier, vol. 93(1), pages 177-201, November.
    13. Tang, Tianwei & Jiang, Xiaojing & Zhu, Kaiwen & Ying, Ziyao & Liu, Wenyu, 2024. "Effects of the promotion pressure of officials on green low-carbon transition: Evidence from 277 cities in China," Energy Economics, Elsevier, vol. 129(C).
    14. Dalia Streimikiene & Grigorios L. Kyriakopoulos, 2023. "Energy Poverty and Low Carbon Energy Transition," Energies, MDPI, vol. 16(2), pages 1-15, January.
    15. Xie, Qing & Yin, Hua, 2024. "Business environment and the choice of entry mode of OFDI: Evidence from China," Journal of Asian Economics, Elsevier, vol. 92(C).
    16. Aydin, Mucahit & Erdem, Azad, 2024. "Analyzing the impact of resource productivity, energy productivity, and renewable energy consumption on environmental quality in EU countries: The moderating role of productivity," Resources Policy, Elsevier, vol. 89(C).
    17. Wang, Yao & Du, Zhili, 2024. "Has energy poverty entangled the households by hindering the filial generation?," Energy Policy, Elsevier, vol. 186(C).
    18. Cleeve, Emmanuel A. & Debrah, Yaw & Yiheyis, Zelealem, 2015. "Human Capital and FDI Inflow: An Assessment of the African Case," World Development, Elsevier, vol. 74(C), pages 1-14.
    19. Zhao, Jun & Dong, Kangyin & Dong, Xiucheng & Shahbaz, Muhammad, 2022. "How renewable energy alleviate energy poverty? A global analysis," Renewable Energy, Elsevier, vol. 186(C), pages 299-311.
    20. Song, Yuegang & Paramati, Sudharshan Reddy & Ummalla, Mallesh & Zakari, Abdulrasheed & Kummitha, Harshavardhan Reddy, 2021. "The effect of remittances and FDI inflows on income distribution in developing economies," Economic Analysis and Policy, Elsevier, vol. 72(C), pages 255-267.
    21. Ekins, Paul & Pollitt, Hector & Barton, Jennifer & Blobel, Daniel, 2011. "The implications for households of environmental tax reform (ETR) in Europe," Ecological Economics, Elsevier, vol. 70(12), pages 2472-2485.
    22. Dogan, Eyup & Hodžić, Sabina & Šikić, Tanja Fatur, 2023. "Do energy and environmental taxes stimulate or inhibit renewable energy deployment in the European Union?," Renewable Energy, Elsevier, vol. 202(C), pages 1138-1145.
    23. Dumitrescu, Elena-Ivona & Hurlin, Christophe, 2012. "Testing for Granger non-causality in heterogeneous panels," Economic Modelling, Elsevier, vol. 29(4), pages 1450-1460.
    24. T. S. Breusch & A. R. Pagan, 1980. "The Lagrange Multiplier Test and its Applications to Model Specification in Econometrics," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 47(1), pages 239-253.
    25. Chen, Hongrui, 2023. "Energy innovations, natural resource abundance, urbanization, and environmental sustainability in the post-covid era. Does environmental regulation matter?," Resources Policy, Elsevier, vol. 85(PB).
    26. Bhattacharya, Mita & Inekwe, John N. & Sadorsky, Perry, 2020. "Convergence of energy productivity in Australian states and territories: Determinants and forecasts," Energy Economics, Elsevier, vol. 85(C).
    27. Chen, Bin & Yan, Jun & Zhu, Xun & Liu, Yue, 2023. "The potential role of renewable power penetration in energy intensity reduction: Evidence from the Chinese provincial electricity sector," Energy Economics, Elsevier, vol. 127(PB).
    28. Ma, Wei & Wu, Tong & Stan, Sebastian-Emanuel & Gao, Bin, 2024. "Ensuring environment sustainability through natural resources, renewable energy consumption, and inflation dynamics," Resources Policy, Elsevier, vol. 90(C).
    29. Noorbakhsh, Farhad & Paloni, Alberto & Youssef, Ali, 2001. "Human Capital and FDI Inflows to Developing Countries: New Empirical Evidence," World Development, Elsevier, vol. 29(9), pages 1593-1610, September.
    30. Shinwari, Riazullah & Wang, Yangjie & Gozgor, Giray & Mousavi, Mahdi, 2024. "Does FDI affect energy consumption in the belt and road initiative economies? The role of green technologies," Energy Economics, Elsevier, vol. 132(C).
    31. Beck, Nathaniel & Katz, Jonathan N., 1995. "What To Do (and Not to Do) with Time-Series Cross-Section Data," American Political Science Review, Cambridge University Press, vol. 89(3), pages 634-647, September.
    32. Uche, Emmanuel & Das, Narasingha & Bera, Pinki & Cifuentes-Faura, Javier, 2023. "Understanding the imperativeness of environmental-related technological innovations in the FDI – Environmental performance nexus," Renewable Energy, Elsevier, vol. 206(C), pages 285-294.
    33. Song, Yang & He, Yinghong & Sahut, Jean-Michel & Shah, Syed Hasanat, 2024. "Can low-carbon city pilot policy decrease urban energy poverty?," Energy Policy, Elsevier, vol. 186(C).
    34. Soto, Gonzalo H & Martinez-Cobas, Xavier, 2024. "Green energy policies and energy poverty in Europe: Assessing low carbon dependency and energy productivity," Energy Economics, Elsevier, vol. 136(C).
    35. Vadlamannati, Krishna Chaitanya & Janz, Nicole & Berntsen, Øyvind Isachsen, 2018. "Human Rights Shaming and FDI: Effects of the UN Human Rights Commission and Council," World Development, Elsevier, vol. 104(C), pages 222-237.
    36. Schleich, Joachim, 2019. "Energy efficient technology adoption in low-income households in the European Union – What is the evidence?," Energy Policy, Elsevier, vol. 125(C), pages 196-206.
    37. Ma, Ning & Sun, Wenli & Wang, Ze & Li, HuaJiao & Ma, Xintong & Sun, Haocheng, 2023. "The effects of different forms of FDI on the carbon emissions of multinational enterprises: A complex network approach," Energy Policy, Elsevier, vol. 181(C).
    38. Nwani, Chinazaekpere & Usman, Ojonugwa & Okere, Kingsley Ikechukwu & Bekun, Festus Victor, 2023. "Technological pathways to decarbonisation and the role of renewable energy: A study of European countries using consumption-based metrics," Resources Policy, Elsevier, vol. 83(C).
    39. Liu, Xia, 2023. "Tourism development, environmental regulations, and natural resource management: Evidence from G20 countries," Resources Policy, Elsevier, vol. 86(PA).
    40. Bournakis, Ioannis & Tsionas, Mike, 2022. "Productivity with Endogenous FDI Spillovers: A Novel Estimation Approach," International Journal of Production Economics, Elsevier, vol. 251(C).
    41. Jin, Baohong, 2023. "Impact of renewable energy penetration in power systems on the optimization and operation of regional distributed energy systems," Energy, Elsevier, vol. 273(C).
    42. Gakuru, Elias & Yang, Shaohua & Namahoro, J.P. & Nie, Peng & Bunje, Madinatou Yeh & Aslam, Naveed, 2024. "Energy-focused green climate policies and trade nexus:Do heterogeneous effects on clean energy poverty matter?," Energy, Elsevier, vol. 294(C).
    43. Daniel Balsalobre‐Lorente & Oana M. Driha & George Halkos & Shekhar Mishra, 2022. "Influence of growth and urbanization on CO2 emissions: The moderating effect of foreign direct investment on energy use in BRICS," Sustainable Development, John Wiley & Sons, Ltd., vol. 30(1), pages 227-240, February.
    44. Kaewnern, Hathaipat & Wangkumharn, Sirikul & Deeyaonarn, Wongsathon & Yousaf, Abaid Ullah & Kongbuamai, Nattapan, 2023. "Investigating the role of research development and renewable energy on human development: An insight from the top ten human development index countries," Energy, Elsevier, vol. 262(PB).
    45. M. Hashem Pesaran, 2015. "Testing Weak Cross-Sectional Dependence in Large Panels," Econometric Reviews, Taylor & Francis Journals, vol. 34(6-10), pages 1089-1117, December.
    46. Zhang, Pengfeng & Yu, Yingchi, 2024. "How does regional technological innovation affect energy poverty? The role of industrial structure distortion," Energy, Elsevier, vol. 291(C).
    47. Fedajev, Aleksandra & Mitić, Petar & Kojić, Milena & Radulescu, Magdalena, 2023. "Driving industrial and economic growth in Central and Eastern Europe: The role of electricity infrastructure and renewable energy," Utilities Policy, Elsevier, vol. 85(C).
    48. Bienvenido-Huertas, David & Sánchez-García, Daniel & Rubio-Bellido, Carlos & Marín-García, David, 2024. "Holistic analysis to reduce energy poverty in social dwellings in southern Spain considering envelope, systems, operational pattern, and income levels," Energy, Elsevier, vol. 288(C).
    49. Jeffrey M Wooldridge, 2010. "Econometric Analysis of Cross Section and Panel Data," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262232588, December.
    50. Ben Cheikh, Nidhaleddine & Ben Zaied, Younes & Nguyen, Duc Khuong, 2023. "Understanding energy poverty drivers in Europe," Energy Policy, Elsevier, vol. 183(C).
    51. Ashouri, Mohammad Javad & Rafei, Meysam, 2021. "How do energy productivity and water resources affect air pollution in Iran? New evidence from a Markov Switching perspective," Resources Policy, Elsevier, vol. 71(C).
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Yuegang Song & Zhuoyan Li & Chien-Chiang Lee, 2025. "The impact of climate policy on energy equity: effect, mechanism, and spatial analysis," Humanities and Social Sciences Communications, Palgrave Macmillan, vol. 12(1), pages 1-21, December.
    2. Struga, Meivis & Polinesi, Gloria & Rossi, Mosè & Carfora, Alfonso & Comodi, Gabriele & Marko, Oltion, 2025. "Measuring energy poverty in rural Albania: A multidimensional and context-sensitive approach," Energy Policy, Elsevier, vol. 206(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Soto, Gonzalo H. & Martinez-Cobas, Xavier, 2025. "Does outward foreign direct investment and the green transition affect renewable energy penetration among European Union countries?," Renewable Energy, Elsevier, vol. 241(C).
    2. Soto, Gonzalo H & Martinez-Cobas, Xavier, 2024. "Green energy policies and energy poverty in Europe: Assessing low carbon dependency and energy productivity," Energy Economics, Elsevier, vol. 136(C).
    3. Soto, Gonzalo Hernández, 2024. "The role of outward foreign direct investment as a filter for high energy intensity economies in the European Union," Applied Energy, Elsevier, vol. 361(C).
    4. Soto, Gonzalo H. & Martinez-Cobas, Xavier, 2025. "Energy poverty and the green energy transition's impact upon income inequality in Latin America," Structural Change and Economic Dynamics, Elsevier, vol. 72(C), pages 220-232.
    5. Touray, Alfusainey & Hao, Yu, 2025. "Bridging the energy gap: Macro-drivers of access-based energy poverty in West Africa," Energy Economics, Elsevier, vol. 148(C).
    6. Gonzalo Hernández Soto, 2025. "Circular Economies and Sectoral Green Productivity in the European Union," Business Strategy and the Environment, Wiley Blackwell, vol. 34(3), pages 2765-2781, March.
    7. Ndayambaje, Jean de Dieu & Yang, Ling & Samuel, Adegboyo Olufemi & Gakuru, Elias, 2025. "The role of climate policies in alleviating global energy poverty. Evidence from system GMM analysis," Energy, Elsevier, vol. 330(C).
    8. Soto, Gonzalo H. & Balsalobre-Lorente, Daniel & Martinez-Cobas, Xavier, 2025. "Environmental legislative shaping or green competitive advantages? The role of FDI among environmental regulations," Energy Economics, Elsevier, vol. 145(C).
    9. Du, Zhaoyi & Njangang, Henri & Kim, Youngchul, 2025. "Beyond the target: How do monetary policies affect energy poverty?," Energy, Elsevier, vol. 320(C).
    10. Aladejare, Samson Adeniyi, 2022. "Natural resource rents, globalisation and environmental degradation: New insight from 5 richest African economies," Resources Policy, Elsevier, vol. 78(C).
    11. Shinwari, Riazullah & Wang, Yangjie & Gozgor, Giray & Mousavi, Mahdi, 2024. "Does FDI affect energy consumption in the belt and road initiative economies? The role of green technologies," Energy Economics, Elsevier, vol. 132(C).
    12. Muhammad Shafiullah & Luke Emeka Okafor & Usman Khalid, 2019. "Determinants of international tourism demand: Evidence from Australian states and territories," Tourism Economics, , vol. 25(2), pages 274-296, March.
    13. Michael Appiah & Mingxing Li & Stephen Taiwo Onifade & Bright Akwasi Gyamfi, 2024. "Investigating institutional quality and carbon mitigation drive in Sub-Saharan Africa: Are growth levels, energy use, population, and industrialization consequential factors?," Energy & Environment, , vol. 35(4), pages 2031-2057, June.
    14. Javed, Asif & Shabir, Maria & Rao, Fabeha & Uddin, Muhammad Salah, 2025. "Effect of green technological innovation and financial development on green energy transition in N-11 countries: Evidence from the novel Method of Moments Quantile Regression," Renewable Energy, Elsevier, vol. 242(C).
    15. Haseeb, Mohammad & Shuaib, Mohd & Emran Hossain, Md & Fan, Fei, 2026. "Unveiling the green revolution: Exploring the impact of outward FDI, green transition, governance quality, and industrial structure on renewable energy penetration," Renewable Energy, Elsevier, vol. 256(PH).
    16. Appiah, Michael & Karim, Sitara & Naeem, Muhammad Abubakr & Lucey, Brian M., 2022. "Do institutional affiliation affect the renewable energy-growth nexus in the Sub-Saharan Africa: Evidence from a multi-quantitative approach," Renewable Energy, Elsevier, vol. 191(C), pages 785-795.
    17. Soto, Gonzalo H. & Zambrano-Monserrate, Manuel A. & Pilatin, Abdulmuttalip & Martinez-Cobas, Xavier, 2025. "Energy resource productivity and environmental quality: A quantile-on-quantile study of Latin America from 1990 to 2022," Utilities Policy, Elsevier, vol. 95(C).
    18. Auteri, Monica & Mele, Marco & Ruble, Isabella & Magazzino, Cosimo, 2024. "The double sustainability: The link between government debt and renewable energy," The Journal of Economic Asymmetries, Elsevier, vol. 29(C).
    19. Michael Appiah & Bright Akwasi Gyamfi & Tomiwa Sunday Adebayo & Festus Victor Bekun, 2023. "Do financial development, foreign direct investment, and economic growth enhance industrial development? Fresh evidence from Sub-Sahara African countries," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 22(2), pages 203-227, May.
    20. Anayochukwu Basil Chukwu & Adeolu O. Adewuyi & Adebowale M. Adeleke & Banji B. Awodumi & Tobechi F. Agbanike, 2022. "Modelling composition of growth, FDI and welfare in Africa: a SEM approach," Economic Change and Restructuring, Springer, vol. 55(4), pages 2445-2478, November.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:energy:v:320:y:2025:i:c:s0360544225009922. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.journals.elsevier.com/energy .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.