REGULATIONS, INNOVATION AND ENERGY CONSUMPTION: EVIDENCE FROM EU HOUSEHOLD

Author(s) : Neelma Shamsi and Maryam Ishaq

Abstract:

This research intended to help us establish the relationship between energy efficiency (EE) and economic development by studying environmentally focused technology advancements. With data from 20 EU countries (ranging from 2008 to 2022), the analysis examines energy consumption by household sectors, focusing on the two main sources of energy, electricity and gas. Two additional indicators added in the analysis to examine their role on EE. We employed cointegration analysis through first generation Dynamic Panel ARDL models (Autoregressive Distributed Lag) to determine the long run and short-run fluctuations of relationship between variables in panel data framework. Three error correction-based test; Pooled mean group (PMG), Mean group (MG) and Dynamic fixed effect (DFE) were employed on four different models for estimating dynamic heterogeneous panel data. While PMG gives contrasting outcomes, MG and DFE come out with conflicting findings, none of which strongly supports a causal link between EE and development. Tests for cross-sectional dependence (Pesaran, 2004; Friedman, 1973) clearly show the need for using second-generation methods of cointegration. Following the use of CCE estimators, there is still not enough proof, which means that a clear connection between EE and economic growth not observed in many countries.