Energy Consumption and Green GDP in Europe: A Panel Cointegration Analysis 2008 - 2016

The paper analyzes the relationship between energy consumption and green GDP as increased energy consumption could cause an increase in GDP. In order to evaluate how and to what extent the increase in energy consumption affects the size and movement of the green GDP, the aim of this paper is to confirm the existence of a strong link between energy consumption and green GDP. Having a large number of papers linking energy consumption and GDP, through this paper, we want to emphasize an even greater role of green GDP in energy consumption by linking the impact of the consumption of different energy sources with the movements in green GDP. Namely, how much different energy sources affect the gap between green GDP and GDP. Within the empirical analysis, we use a panel cointegration technique to examine long-term relationships among integrated variables. The data analyzed in this model cover 36 countries for the period from 2008 to 2016. These 36 countries include the EU28 countries and potential candidates for accession in the European Union. The results of our analysis follow the theory as we found that an increase in energy consumption causes an increase in GDP, hence the green GDP. However, the second part of the analysis suggests that an increase in consumption of energy in sectors that are environmentally more damaging emphasize the gap between the GDP and green GDP, but that an increase in more environmentally cleaner energy consumption curtails that gap.