The Effects of Foreign Direct Investment and Technological Innovation on Renewable Energy Consumption Under Varying Market Conditions in the EU

Godswill Osuma () and Lumengo Bonga-Bonga
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Godswill Osuma: School of Economics, University of Johannesburg, Auckland Park, Johannesburg 2006, South Africa

Energies, 2025, vol. 18, issue 6, 1-15

Abstract: The transition to renewable energy is a critical priority for the European Union. However, the roles of foreign direct investment and technological innovation in shaping renewable energy consumption remain unclear. This study examines their joint influence across 20 European Union countries from 2013 to 2023, employing Method of Moments Quantile Regression to capture varying effects under different market conditions. The findings reveal that technological innovation consistently enhances renewable energy consumption, strengthening its impact from 0.298 in the 10th to 0.488 in the 90th quantile, particularly in economies with a robust renewable energy infrastructure. However, FDI negatively affects renewable energy consumption across all quantiles, with coefficients ranging from −0.00000228 to −0.00000324, suggesting that foreign investments may not always align with clean energy goals. Additionally, inflation positively influences renewable energy consumption, implying that rising energy prices drive a shift toward renewables, while economic growth initially increases fossil fuel reliance before transitioning to cleaner sources. The study’s results emphasise the need for strong policy interventions to ensure that FDI aligns with renewable energy goals and that technological innovation continues to drive clean energy adoption.

Keywords: foreign direct investment; technological innovation; renewable energy consumption; quantile regression; energy transition (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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