Analyzing the role of main energy transition policies upon renewable energy penetration in the EU: An assessment of energy productivity and low carbon economies

In this study, we examine the relationship between various variables related to the transition process toward green economies outlined in the European Green Deal guidelines among member countries of the European Union. The two primary variables of interest are energy productivity and low carbon economies between 2004 and 2022 upon renewable energy penetration. By employing fully modified ordinary least squares (FMOLS) and canonical cointegrating regression (CCR) estimation methods and dynamic ordinary least squares (DOLS) for robustness, we conclude that energy productivity discourages the use of renewable energy among European countries, having a negative effect on the utilization of said energy estimated at a decrease of renewable energy use by 0.24% for each 10% increase in energy productivity. On the other hand, the transition process toward less fossil fuel-dependent energy contributes to a greater utilization of renewable energy, with a 0.11% increase for each 10% increase in the use of renewable energy over fossil fuels. Within this analytical framework, we observe that the positive correlation between energy productivity and environmental sustainability does not stem from an uptick in renewable energy integration. Instead, it arises from a reduction in energy inputs within the broader productivity framework. Concurrently, the transition towards greener energy landscapes aims not merely to curtail overall energy consumption but to initiate a strategic process of substituting conventional fuel sources with renewable alternatives, thereby fostering environmental enhancement through energy source diversification.