The interplay between technological innovation, energy efficiency, and economic growth: Evidence from 30 European countries

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It is assumed that technological progress plays a vital role in energy efficiency improvements when the effects of industrial restructuring, infrastructure, environmental challenges, and economic shocks seem more dubious. However, a limited number of studies have been conducted to examine the impact of technological innovation on countries’ energy efficiency levels. This study aims to explore the relationship between energy efficiency, technological innovation, and economic growth in 30 European countries by utilizing data from 2012 to 2020. To this end, a two-stage analysis is carried out. The first step involves estimating the total factor energy efficiency (TFEE) by the countries to illustrate the effects of energy parameters on economic growth and the environment, and technological innovation (TI) to estimate the innovation capability of each country by using data envelopment analysis (DEA) methodology. The second step includes a panel regression model to explore how technological innovation affects energy efficiency, considering the degree of government intervention, industrial structure, infrastructure, and economic openness.
The results indicate that the bottom-15 countries, whose TFEE scores were the lowest, are mainly countries of Central and Eastern Europe. Regarding the countries’ technological capability, the results were similar, but the score was lower than the TFEE.
Moreover, the regression analysis shows that a one percent increase in innovation activity contributes to an increase in energy efficiency by 0.27 percent. Hence, it confirms the notion of a positive impact of new technology on energy efficiency.

Acknowledgments
The study is supported by the grant from the Research Based Innovation “SFI Marine Operation in Virtual Environment (SFI-MOVE)” (Project No. 237929) in Norway.

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    • Figure 1. Effects of technological change on the neoclassical production function
    • Figure 2. Relationship between total factor energy efficiency (TFEE) and technological innovation (TI)
    • Figure 3. The DEA case with one input and two outputs
    • Figure 4. Estimated bi-annual values of TFEE, 2012–2020
    • Figure 5. Estimated bi-annual values of TI, 2012–2020
    • Figure 6. Growth rates of TFEE and TI, 2012–2020
    • Figure 7. Average values of TFEE and TI, 2012–2020
    • Figure 8. Correlation between TFEE and TI for 30 European economies, 2012–2020
    • Figure 9. Energy consumption, GDP growth, and CO2 emissions from the energy sector, average for 30 European countries, 2012–2020
    • Figure 10. R&D expenditures and patents granted, average for European countries, 2012–2020
    • Table 1. The top 15 and bottom 15 (TFEE)
    • Table 2. The top 15 and bottom 15 (TI)
    • Table 3. Correlation between TFEE and TI bi-annually, 2012–2020
    • Table 4. Regression results, 2012–2020
    • Table 5. Panel data (time series cross-section) analysis, 2012–2020
    • Table 6. Cross-sectional data analysis, 2020
    • Conceptualization
      Viktoriia Koilo, Ola Honningdal Grytten, Jan Emblemsvag
    • Data curation
      Viktoriia Koilo
    • Formal Analysis
      Viktoriia Koilo
    • Investigation
      Viktoriia Koilo
    • Methodology
      Viktoriia Koilo
    • Resources
      Viktoriia Koilo
    • Software
      Viktoriia Koilo
    • Validation
      Viktoriia Koilo, Ola Honningdal Grytten, Jan Emblemsvag
    • Visualization
      Viktoriia Koilo
    • Writing – original draft
      Viktoriia Koilo
    • Writing – review & editing
      Ola Honningdal Grytten, Jan Emblemsvag