The Effect of Economic Freedom, Indicators of Financial Sector Development, Income and Education on Renewable Energy Use: An Empirical Analysis of Post-Transition EU Member States

Gamze Sart, Yilmaz Bayar () and Marina Danilina
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Gamze Sart: Department of Educational Sciences, Hasan Ali Yucel Faculty of Education, İstanbul University-Cerrahpaşa, 34500 Istanbul, Turkey
Yilmaz Bayar: Department of Public Finance, Faculty of Economics and Administrative Sciences, Bandirma Onyedi Eylul University, 10200 Bandirma-Balikesir, Turkey
Marina Danilina: Department of Economics, Plekhanov Russian University of Economics (PRUE), 117997 Moscow, Russia

Energies, 2025, vol. 18, issue 5, 1-19

Abstract: Fossil fuels are among the most crucial factors underlying global environment impairment through CO 2 emissions. In addition to this, the globalized world has witnessed significant price volatility, instability and disruptions in the supply of fossil fuels. Therefore, renewable energy transition (RET) has become a mandatory option for countries to tackle these environmental, economic, and energy insecurity problems in energy markets dominated by fossil fuels. But the RET process has remarkably slowed down in recent years due to increasing economic volatility, financial obstacles, geopolitical risks, and bottlenecks in the development of low-carbon technologies. In this regard, this study investigates the effect of market structure proxied by economic freedom and indicators of financial development, together with real GDP per capita and education, on the utilization of renewable energy in post-transition EU member states across the 2000–2021 duration by utilizing causality and cointegration tests. The outcomes of the causality analysis reveal a feedback relationship among renewable energy use, economic freedom, indicators of financial development, and real GDP per capita but a unilateral causality between education and renewable energy use. On the other hand, the outcomes of AMG estimation reveal a positive effect of economic freedom, real GDP per capita, and education on the utilization of renewable energy in some countries but a negative effect of financial institutions’ development on renewable energy use and mixed results on the effect of financial markets’ development regarding renewable energy use. Our results indicate that education is a significant instrument to make progress in renewable energy use via multiple channels, but governments should incentivize the financial system to support the RET process by favorable lending and sustainable finance instruments like green bonds or sustainability-linked loans.

Keywords: renewable energy; economic freedom; financial institutions; financial markets; real GDP per capita; education; panel date econometrics (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2025
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