Renewable Energy in the Eurozone: Exploring Macroeconomic Impacts via FMOLS

Abstract

This article examines the relationship between macroeconomic variables and the share of renewable energy in Eurozone countries from 2006 to 2020. Using the Fully Modified Ordinary Least Squares (FMOLS) method, we analyze the impact of Gross Domestic Product (GDP) per capita, unemployment rate, Financial Development Index (FDI), inflation, government efficiency, and corruption control on the proportion of renewable energy. Focused on the Eurozone, our study fills a gap in existing research. We compile diverse findings from the literature review on this topic. Our analysis reveals that higher GDP per capita positively influences the proportion of renewable energy, while unemployment, lower financial development, higher inflation, inefficient governance, and corruption negatively impact renewable energy adoption. These findings underscore the importance of addressing economic development alongside sustainable energy initiatives. Policymakers should prioritize improving GDP per capita, and addressing barriers such as unemployment and corruption to facilitate the transition to a more sustainable energy landscape in the Eurozone.