Are the structure dynamics of capital stock impacting carbon intensity from energy consumption? European insights

Abstract

This research investigates the effects of capital stock structure, energy intensity, energy transition, ecological footprint, and trade openness on the carbon intensity of European countries from 1990 to 2021. A panel autoregressive distributed lag estimator, following an unrestricted error correction model, and the moments’ quantile regression method were utilized to capture both the short- and long-run impacts of covariates on carbon intensity and to assess the behavior of the estimated parameters by quantile. The results indicated (i) a positive parameter for capital structure, revealing that a relative shortage of public capital makes private capital environmentally inefficient; (ii) positive parameters for energy intensity and ecological footprint, denoting their contribution to increases in carbon intensity; (iii) negative parameters for the ratio between fossil and renewable energy consumption and the trade variable, representing a more efficient path toward reducing carbon intensity per unit produced/exported. The study supports that policymakers should (a) stimulate public investment to increase the efficiency of private investment, (b) accelerate the deployment of renewable energy, (c) explore the contribution of trade openness, (d) disincentivize activities with high energy intensity, and (e) circumscribe the impacts of ecological footprints to help reduce the carbon intensity of countries.