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Economic Growth and the Environment in the Post-Socialist European Union Member States - A Panel Analysis

Economic growth and the environmental protection, primarily through reduction of greenhouse gases (GHG) and increase in the share of the renewable energy sources (RES) in total energy consumption, are one of the most important economic policy goals of the European Union (EU) and hence part of the EU's 20-20-20 agenda. Post-Socialist member states of the EU have so far had a special status compared to the older EU member states when it comes to achieving the EU climate targets, either through laxer individual counties' targets, exemptions from regulation or greater availability of funds. This paper hence focuses on this particular group of countries to analyze the interaction between the economic growth, renewable energy consumption and carbon dioxide (CO2) emissions. Given the lack of the analyses of the GDP – RES – GHG nexus in the post-Socialist EU countries in the existing empirical literature, this paper adds to the existing literature. We apply ARDL framework on a panel data of the eleven post-Socialist EU Member States from 1992 to 2014. The results show, first, that there is bidirectional positive relationship between RES and GDP in the long and short run. In the short run the link between growth rate of RES and GDP growth is not confirmed. Second, the analysis found the short-run positive impact of GDP growth on CO2growth and the long-run positive impact of CO2on GDP, but these results are not robust. Finally, there is a negative and likely bidirectional long-run and short-run relationship between CO2 and RES, but the short-run link between their growth rates is not confirmed. These results mostly do not differ from the existing conclusions about the GDP – RES – GHG relationship in the other EU countries. It suggests that although they have a positive relationship between emissions and economic growth, meaning that their emissions reductions cannot significantly occur without taking a toll on their GDP, their special status did not affect their ability to complete the main goals of the EU. Namely, they can ensure economic growth while expanding the use of RES in their energy mix and at the same time have a decrease in the emissions due to this greater RES share.

economic growth ; renewable energy ; greenhouse gas emissions ; ARDL ; post-Socialist EU member states

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