Do fiscal policies, energy productivity, and renewable energy generation contribute to environmental sustainability in EU countries? Evidence from new panel data estimators

Globally, as the use of non-renewable rather than renewable energy sources continues to increase, energy-related CO2 emissions will continue to rise. Fiscal policies (energy tax - energy R&D expenditures) can be used as a tool to reduce these emissions and direct towards more sustainable energy sources. The main purpose of this study examines how energy-related CO2 emissions in EU economies are affected by energy productivity, energy tax, renewable energy R&D expenditure, and renewable energy generation between 2000 and 2022. To examine long-run relationships, the Westerlund-Edgerton cointegration test was applied. The results show that all group and panel statistics are statistically significant, confirming the presence of cointegration. After statistically verifying the existence of cointegration, long-run coefficient estimators are examined. Findings from long-run coefficient estimators (AMG-DCCE) are as follows: (i) Renewable energy generation reduces energy-related CO2 emissions in Austria, Hungary, Ireland, Italy, Netherlands, Norway, Portugal, and Spain. Across the panel, renewable energy generation reduces energy-related CO2 emissions. (ii) R&D expenditures on renewable energy increases energy-related CO2 emissions in Finland and Ireland. In contrast, R&D expenditures on renewable energy reduce energy-related CO2 emissions in Austria and France. (iii) Energy taxes increase energy-related CO2 emissions in Austria and Norway. On the contrary, it decreases energy-related CO2 emissions in Finland and France. (iv) Energy productivity reduces energy-related CO2 emissions in Denmark, Finland, Portugal and Spain but increases them in France. In light of these conclusions, the study offers fresh perspectives on how innovative and coordinated energy policies might lower energy-related emissions in developed EU nations.