Analysing the Energy Stocks Dynamics in European Countries Under an Energy Transition Framework

Abstract

In recent years, threats to economic development due to escalating tensions related to fossil fuel use in the global energy landscape, have accelerated the need to stimulate the energy transition towards the use of renewable energy. Consequently, renewable energy, which today is seen as an important opportunity and the primary solution, has become the focus of international and local policymakers, mainly, in the developed countries that depend on fossil fuel imports such as European countries. The objective of this paper is to examine the dynamics of renewable energy in European nations by analysing the energy stock changes as a function of a set of variables mainly the production and the consumption of renewable energy. To do this, we used a Probit model considering the energy characteristics of countries as a function of their potential economic impact. The findings suggest that the increase of renewable energy proportion in the total energy sup-ply results in a reduction in the energy stock levels in the countries studied, while greater openness to international energy markets results in an increase in energy stocks to deal with market shocks. Stretching further the analysis, the estimated parameters obtained from the Probit estimation were employed to divide the countries used in the sample into three groups based on their propensity towards a decrease in their energy stocks