Spatiotemporal influencing factors of energy efficiency in 43 european countries: A spatial econometric analysis

The increase in consumption and the increase in the use of resources linked to increasing human activity puts both energy security and sustainability at risk, which has led to a global restructuring of the policy agenda to ensure and integrate environmental well-being through channels such as energy efficiency (EE). Bearing this in mind, the objective of this research is to analyze the relationship between energy efficiency, renewable energy and financial development? For this reason, an analysis is conducted, which includes energy intensity measured by the Gross Domestic Product (GDP) per unit of energy use as a measure of efficiency for 43 European countries (period 1990–2019). The objective is to observewhether the use of renewable energy and the investments being made are driving economies towards higher EE and sustainable economic growth. The present study leverages on spatial econometrics models, which allow for the analysis of spillovers between economies. The results obtained allow us to observe the existence of spatial autocorrelation of EE between countries in Europe. Secondly, it is observed that the use of renewable energies promotes EE in neighbouring economies, as well as in the return effect. On the other hand, financial development shows that only the institutional component favours EE by generating a return effect on the economy itself, while the stock market component deteriorates the EE of neighbouring economies and on the same economy. Therefore, the analyzed data shows that the use of renewable energies promotes the improvement of EE and that being close to countries that replace the use of traditional energies with alternative sources has a positive effect on national EE. These mechanisms would allow policy makers to develop mechanisms for greener and more sustainable development, while encouraging efficient energy use.