RENEWABLE ENERGY AND RENEWABLE R&D IN EU COUNTRIES : A COINTEGRATION ANALYSIS

Abstract

In recent years, increased attention has been directed towards carbon dioxide emissions and environmental impacts, as industrialized countries have had to find ways of reducing energy use in order to meet Kyoto targets. One way in which such a reduction in energy use could be achieved would be to develop renewable energy. In comparison with that generated from fossil fuels, electricity generated from renewable energy sources would give rise to lower greenhouse gas emissions. An increased share of renewable electricity would thus help to reduce the impact of greenhouse gas emissions on the environment and human health (European Environment Agency). The relationships between the increased share of renewable electricity in gross electricity consumption and renewable energy-related R&D for countries in the EU region is an important topic to investigate for several reasons. First, in comparison with other regions, EU countries are the most committed to the development of renewable energy and to reducing their carbon dioxide emissions. Second, the EU is a very promising area for energy-related R&D. Studying the influence of renewable energy-related R&D on the share of renewable energy can help policy-makers make appropriate investments. This paper investigates the relationships among the share of renewable electricity in gross electricity consumption, GDP, the oil price as well as the R&D of renewable energy for EU countries, using a newly-developed panel unit root and cointegration framework. We find that higher income and oil prices in the future will help EU countries to boost the share of renewable electricity in gross electricity consumption. Moreover, governments in EU countries could use the so-called technology-push climate policy to persistently stimulate the share of renewable electricity in gross electricity consumption and meet the targets laid down by the EU commission.