Convergence of Energy Efficiency, Energy Intensity and Carbon Dioxide Emissions in the European Union

Energy is a vital source for production, as well as for economic growth. Energy use in production process is in turn responsible for environmental degradation and climate change. Energy use in production is estimated to grow by 56 percent within twenty years. Accordingly, anthropogenic greenhouse gas emissions are foreseen to increase more than 1.5 times by 2030. Therefore, efficient energy consumption has gained attention in energy-environment-economic growth literature due to the gap in demand for energy supply and its effects on climate change. Moreover, energy efficiency plays a vital role for both increasing economic performance, and ensuring energy security as well as creates environmental sustainability. Therefore, it is important to increase energy efficiency by reducing energy intensity and apply effective strategies in order to minimize the negativity of energy use that contribute to environmental degradation and climate change. To do this, in this study, we focus on energy intensity convergence in European union member states, that is one of the highest energy consumer regions in the world. On the other hand, using newly established club convergence technique we try to identify heterogeneous structure within apparently homogenous group of countries in order to help policy makers, legislators and environmentalists to generate effective strategies. In addition to the EU-28 members, EU-15 and the new EU members joined after 2004 are analysed as distinct groups for the periods 1990–2016, 1990– 2004 and 2005–2016. Our results show convergence amongst the EU countries during the full and two subsample periods considered. However, the convergence iv takes place within clusters and there is no evidence of all members converging to a single club. On the other hand, in another chapter of this study, we use the same technique and try to identify heterogeneous clubs in case of CO2 intensity in EU-28 region for the same group of countries and same time periods. The estimation results show important evidences of different clubs for investigated time periods. Finally, in the last chapter, we try to observe how energy efficiency and CO2 emissions affect the economic growth for the newly membered country, namely Romania.Moreover, their long run relationship was investigated by using an autoregressive distributive lag model (ARDL) in cooperating with renewable energy consumption and the direction of causality was achieved via the Toda-Yamamoto model for the period between 1990 and 2014 on a quarterly basis. The results provide the evidence of cointegration among the variables under consideration. The causality results show feedback causality between energy intensity and economic growth while unidirectional causality is seen running from renewable energy consumption to economic growth. Keywords: Club Convergence; Carbon Intensity; Economic Growth; Energy Intensity; European Union; Renewable Energy.