The Relationship between Economic Complexity, Energy Consumption Structure and Greenhouse Gas Emission: Heterogeneous Panel Evidence from the EU Countries

Abstract

The aim of the paper is to examine the long-term relationship between economic complexity, energy consumption structure, and greenhouse gas emission, within a panel of European Union countries and two subpanels: (i) European economies with higher economic complexity and (ii) European economies with a lower level of economic complexity. Taking into consideration the heterogeneity among European countries, the heterogeneous panel technique is used, including panel estimation through fully modified least squares (FMOLS) and dynamic ordinary least squares (DOLS). The empirical findings indicate a long-term equilibrium relationship between economic complexity, energy consumption structure and greenhouse gas emission within all three panels. Economic complexity and energy consumption structure have a statistically significant impact on greenhouse gas emission within all panels, but the influence is higher within the subpanel of countries with a lower level of economic complexity, suggesting a higher risk of pollution as the economic complexity grows and as the energy balance inclines in favor of non-renewable energy consumption. Our paper suggests that the economic complexity is a variable that must be taken into consideration when national economic and energy policies are shaped. Finally, policy implications for each panel of countries are discussed.

The Link between Economic Complexity and Carbon Emissions in the European Union Countries: A Model Based on the Environmental Kuznets Curve (EKC) Approach

“…The composition of a country's productive output and the structure that emerges to hold and combine knowledge are substantiating this concept [1][2][3]. Complex economies are those that can manage relevant knowledge across large networks of people, to generate a diverse mix of knowledge-intensive products, while simpler economies possess a narrow basis of productive knowledge and produce fewer and simpler products, requiring smaller networks for interaction [3], p. 18.…”

“…ECI was found as a factor of suppressing CO 2 emissions. Another recent study (Neagu and Teodoru, 2019) [18] investigates the effect of ECI on greenhouse gas emissions in 25 the European Union countries for 1995-2014. Their findings reveal that the speed of reducing pollutant emissions is higher in countries with higher economic complexity of their products, suggesting that differences in energy efficiency and energy mix composition may introduce variations in the impact of economic complexity on pollution.…”

European countries’ typology by the intensity of transboundary cooperation and its impact on the economic complexity level

“…There has been a link identified between it and productivity (Sweet & Eterovic 2019), foreign direct investment (FDI) (Javorcik et al 2017), it has been discovered that more populated cities export proportionately more skill-intensive and complex goods than less populated citiesz-Lanchas, Llano, (Minondo et al 2018). Recent years saw also works connecting it to environmental issues (see, for example, Neagu et al 2019). The authors examine the longterm relationship between economic complexity, energy consumption structure, and greenhouse gas emission.…”

“…This allows eliminating endogeneity in the regressors and serial correlation in the errors. This method has already been applied to the economic complexity assessment in previous works (see, for example, Neagu et al 2019;Dogan et al 2017).…”

Green Procurement Decisions with Carbon Leakage by Global Suppliers and Order Quantities under Different Carbon Tax

“…The carbon tax depends on technological challenges and political decisions reflected to the GHG emissions intensity and the carbon price, respectively. With regarding to the technological challenges, since the transition from coal towards oil, gas and renewable sources is slower in lower economic complexity suggested by Neagu and Teodoru [52], the GHG emissions in emerging countries would not be reduced in the short term. On the other hand, in terms of the political decisions, the carbon prices could be changed rapidly by each governor's decision for environmental policies because the carbon tax depends on the carbon price and the GHG emissions only in each country.…”