Towards a common renewable future: The System-GMM approach to assess the convergence in renewable energy consumption of EU countries

This paper investigates whether the contribution of renewable energy sources to primary energy consumption is characterized by a convergence process across core European Union (EU) countries over the period from 1990 to 2014. The System Generalized Method of Moments (GMM) methodology is employed for 5-year span panel data of 14 EU members. The findings indicate strong evidence for both the absolute (unconditional) and conditional convergence of renewables' share in primary energy consumption across EU-14 countries. Moreover, the control variables, namely CO₂ emissions per GDP, FDI inward stock and electricity prices contribute to the speed of convergence. Hence, the (implicit) rate of conditional convergence is higher than that of absolute convergence. The empirical evidence suggests that the energy mixes of core EU members have a tendency to become similar in the long-run as the shares of RES in primary energy consumption converge to the average level. Nonetheless, it does not necessarily imply that this average would be 20% target, which is to be achieved by 2020 according to EU directive 2009/28/EC.