DEPENDENCE OF CO2 EMISSIONS ON ENERGY CONSUMPTION AND ECONOMIC GROWTH IN THE EUROPEAN UNION: A PANEL THRESHOLD MODEL

Abstract

This work aims to analyse the dependence of carbon dioxide (CO2) emissions on primary energy consumption at different Gross Domestic Product (GDP) levels in 28 European countries. Data for the years 1995-2019 were used to develop the models. Random Effects, Fixed Effects, a nonlinear panel threshold model and a continuous kink model were used in the panel data analysis. The work shows that the dependence of CO2 emissions on energy consumption varies at different levels of GDP. The model with two threshold values, which determine three modes of behaviour, proves to be the most suitable. As GDP levels increase, the regression coefficient of the dependence of CO2 emissions on energy consumption decreases. Understanding the relationship between these variables is essential for informed and evidence-based decision-making and adopting new or revision of existing energy and climate policies and strategies at the EU and national levels.