The Impact Total Energy Supply and Renewable Energy on Economic Growth in the Eu-27 Countries. A Dynamic Panel GMM Analysis

Energy, just like any other factors of production, plays a vital role in boosting economic growth of nations. Recently, due to the outbreak of war between Ukraine and Russia, instabilities in all world economies have been observed. Russia is one of the largest suppliers of energy in the world, especially in the European Union (EU) countries. The current study seeks to examine the role of total energy supply on economic growth in the EU. The study employs a panel data of 27 EU countries from 1990 – 2019. Dynamic Generalized Method of Moments which is robust over endogeneity, Fully Modified Ordinary Least Squares (FMOLS) and Dynamic Ordinary Least Squares (DOLS) are employed. The current study differs from past studies in that it considers the interaction between energy and capital, “effective capital”, hence its main novelty. The study results shows that carbon emissions, renewable energy, capital, effective capital and population size have a significant positive impact on GDP in the EU-27 countries. Primary energy supply is observed to exhibit for a negative significant effect on GDP, whereas the results of DOLS technique gives a significant positive effect