Examining the Influence of Digitalization and Innovation on Improving Energy Structure toward Renewables. Evidence from the European Union

Authors: Gina Cristina Dimian, Mihaela Maftei, Mirela Gheorghe, Dana Maria Boldeanu, Josef Jablonský

Abstract

The article investigates the effects of digitalization and innovation on energy consumption and structure in the 27 countries of the European Union during 2000–2023. This article uses the Autoregressive Distributed Lag (ARDL) model to test the influence of the level of digitalization and the potential for innovation on energy consumption (primary, final, and renewable) while controlling for certain factors expected to have a significant impact on energy consumption (economic development and structure, prices, and trade dynamics). The results indicate that in the long run, both the level of digitalization and the innovation potential influence energy consumption. However, these drivers have the most significant and straightforward impact on the energy structure by increasing the share of renewable energy in final consumption. Additionally, ICT exports, economic structural changes, and inflation boost renewable energy shares. The study includes factors specific to the situation of the EU in the empirical analysis, such as investments in research and development and ICT exports and imports, to determine their role in the balance of the energy market. These results imply that EU economies should implement and enhance innovation, research and development, and education policies to facilitate the transition to clean energy. Additionally, EU nations should regard ICT trade as crucial in their green energy policies.