Accelerating the Renewable Energy Transition: Short-Run and Long-Run Effects of Trade, Investment, and Industrial Development in Sweden, Denmark, and Austria

Renewable energy consumption (REC) has become increasingly important in achieving sustainable economic growth and reducing environmental degradation. This study investigates the factors influencing renewable energy consumption in Sweden, Denmark, and Austria from 1985 to 2024. Using annual panel data obtained from the World Bank, the study examines the effects of imports of goods and services (IGS), exports of goods and services (EGS), industrial development (IDT), foreign direct investment (FDI), and gross capital formation (GCF) on renewable energy consumption. The analysis employs panel regression and the Autoregressive Distributed Lag (ARDL) approach to evaluate both short-run and long-run relationships among the variables. The panel regression results indicate that exports of goods and services and gross capital formation significantly influence renewable energy consumption, while foreign direct investment and industrial development are statistically insignificant. The ARDL long-run estimates reveal that gross capital formation has a significant positive effect on renewable energy consumption, whereas industrial development has a significant negative effect. In contrast, exports and foreign direct investment do not exhibit significant long-run impacts. The short-run analysis shows that most explanatory variables have insignificant effects on renewable energy consumption, suggesting that the benefits of investment, trade, and industrial transformation require time to materialize. Furthermore, the cointegration test indicates the absence of a stable long-run equilibrium relationship among the variables, and therefore no error correction mechanism is established. The findings highlight the importance of sustained capital investment in promoting renewable energy adoption and provide valuable policy implications for enhancing renewable energy development in European economies.

Renewable Energy Consumption, Gross Capital Formation, ARDL Model

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