Impact of Renewable and Non-Renewable Energy Consumption on the Production of the Agricultural Sector in the European Union

Abstract

The primary objective of this study is to examine the relationships between energy consumption in agriculture from renewable and non-renewable sources and the production levels in the agricultural sector across European Union countries. Additionally, this study aims to identify countries that differ in the development of their agricultural sector in terms of environmental care and to highlight the causes and consequences of these identified disparities. The classification of countries was conducted using the Principal Component Analysis method and a biplot. Panel data for the period 2000–2022, a VAR model, the impulse response function (IRF), and causality tests were used for this study. The results indicate two distinct groups of countries that significantly differ in adopting green agricultural practices. Only seven EU countries stand out for sustainable agriculture with low pesticide use, a significant share of organic farms, and high use of renewable energy in agriculture. Energy consumption affects agricultural production differently in the two groups of countries studied: in countries with sustainable agriculture, an increase in renewable energy consumption translates into a positive increase in agricultural production. On the other hand, an increase in non-renewable energy consumption shows a dampening effect on agricultural production growth, especially in countries with less sustainable agriculture. The results of this study highlight the need to promote renewable energy development in agriculture and raise awareness about the adverse environmental effects of intensive agriculture while emphasising the positive impact of organic agriculture on agricultural production.