Energy–Growth Nexus in European Union Countries During the Green Transition

This study investigates the relationship between economic growth and energy consumption—both renewable and non-renewable—in European Union countries during the green transition. Using a panel dataset of 28 EU countries from 1995 to 2021, we employ econometric techniques—including the Westerlund cointegration test and a fixed-effect panel threshold model—to assess long-term equilibrium relationships. The results indicate that while both renewable and non-renewable energy consumption are associated with economic growth, their roles differ. Renewable energy consumption shows a positive but less robust relationship with economic growth. In contrast, non-renewable energy consumption demonstrates a more robust bidirectional causality with economic growth, indicating a more intertwined relationship with economic growth during the study period. Interestingly, in countries with high levels of non-renewable energy consumption—classified as regime 2 in the panel threshold model—increased non-renewable energy consumption is associated with a decrease in economic activity. Our results have significant policy recommendations, indicating that promoting renewable energy sources does not hinder economic growth. Moreover, such promotion has the potential to contribute substantially to economic growth in the future. Therefore, in addition to other crucial benefits, such as increased energy security, the development of renewable energy sources does not threaten the economy. This is particularly relevant as many EU countries, including Poland, Romania, Hungary, Bulgaria, Slovakia, and Lithuania, still have underdeveloped renewable energy sectors.