4.6 Article

Does energy efficiency and trade openness matter for energy transition? Empirical evidence for countries in the Organization for Economic Co-operation and Development

Journal

ENVIRONMENT DEVELOPMENT AND SUSTAINABILITY
Volume 23, Issue 9, Pages 13569-13589

Publisher

SPRINGER
DOI: 10.1007/s10668-021-01228-z

Keywords

Clean energy transition; Low-carbon energy transition; OECD; FGLS; PCSE

Funding

  1. NECE-UBI, Research Unit in Business Science and Economics - Portuguese Foundation for the Development of Science and Technology (Fundacao para a Ciencia e a Tecnologia) [UIDB/04630/2020]

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This paper examines the determinants of energy transition in OECD countries from 1971 to 2016, finding that energy security and carbon intensity hinder low-carbon transition, while energy efficiency and trade openness drive the transition, necessitating the reduction of fossil fuel use to accelerate the transition.
An energy transition is currently underway around the world, in response to the objectives laid out by international agreements. Since the Kyoto protocol and the Paris agreement, countries have been making considerable efforts to replace fossil fuels with alternative sources in the electricity generation mix. The energy transition of each country depends on their starting point, so international agreements on their own, may not be effective in speeding up the transition. In this paper, two energy transition metrics are calculated: clean-energy transition and low-carbon-energy transition. The clean-energy transition describes the transition from fossil to renewable sources, while the low-carbon-energy transition represents the transition from fossil to renewable and nuclear power sources. This paper aims to examine the determinants of energy transition in countries of the Organization for Economic Co-operation and Development over a long-time span, from 1971 to 2016. Feasible Generalized Least Squares (FGLS) and Panel-corrected Standard Errors (PCSE) estimators were applied to deal with heteroskedasticity and cross-sectional dependence phenomena. Generally, the results show that energy security and the carbon-intensity of energy consumption are obstructing a low-carbon transition. Energy-efficiency and trade-openness are driving the energy transition, while the carbon-intensity of energy consumption is constraining it. Energy efficiency measures are needed to accelerate the energy transition, by reducing the use of fossil fuels.

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