Interconnected tides: Analyzing European energy markets dynamics in the post-COVID era

Ummara Razi and Muhammad Ramzan

Applied Energy, 2025, vol. 389, issue C, No S0306261925005331

Abstract: The COVID-19 pandemic has had a profound impact on European energy markets, driving volatility, price surges, and heightened market integration, exacerbating investment challenges. Thus, this study evaluates the post-COVID-19 interconnected dynamics of the energy markets in Europe, focusing on energy return connectedness across 12 key European countries through static and dynamic Quantile Vector Autoregression (QVAR) and VAR models. The analysis revealed the substantial directional connectedness with Spain, Poland and Finland as the major transmitters of energy market shocks. Whereas, Sweden, France and Norway emerged as net receivers. They highlight the heterogeneous yet interdependent European energy markets, shaped by local energy policies, geopolitical uncertainties and market volatility. The study, through a detailed examination of mean and variance connectedness, reveals energy infrastructure vulnerabilities, in particular in highly interconnected markets, amplified shock transmission across crises. Based on the findings, the study suggested actionable policy recommendations, including strengthened cross-border energy infrastructure, greater renewable integration, targeted development of strategic energy storage, and EU-wide crisis management. By contributing to the energy market integration literature, this research offers important implications to the policymakers concerned with the improvement of energy security and stability in Europe's linked energy landscape.

Keywords: Energy market dynamics; Europe; Post-COVID era; Energy security; QVAR; VAR (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1016/j.apenergy.2025.125803

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