Diverse pathways to decarbonization: cluster-specific impacts of energy sources on CO2 emissions in the European Union

Abstract

This study examines the relationship between different energy sources and CO₂ emissions across European Union (EU) countries through a regression clustering panel data analysis. Using a dataset from 2011 to 2022, we identify distinct country clusters and analyse the impact of energy sources, including gas, coal, oil, wind, biofuels, solar, hydro and nuclear, on CO₂ emissions within these clusters. The regression cluster analysis reveals significant differences in the impact of these energy sources on emissions across the EU. In particular, gas, coal and oil all have positive and significant coefficients, with coal having the largest impact on CO₂ emissions across all clusters. Conversely, biofuel shows a consistently negative and significant effect, indicating its potential to reduce CO₂ emissions. Wind shows mixed behaviour, with both positive and negative significance in certain clusters, highlighting the complexity of integrating wind energy into existing infrastructures. Coefficients of determination R² for individual clusters ranges from 0.9818 to 0.9940, indicating the high reliability of the models. The variables Solar, Hydro and Nuclear show the least significant coefficients. These findings underscore the need for tailored energy policies that consider the specific conditions of each country cluster in order to achieve an effective transition away from fossil fuels and maximise the benefits of renewable energy sources. This study provides critical insights for policymakers aiming to meet climate change targets and underlines the urgent need for strategic energy and climate change policies aligned with the unique characteristics of each EU country cluster to facilitate a successful energy transition.