Greenhouse gas emissions, investment and prices in the EU electricity and gas industry

This paper analyses the long-run relationship between greenhouse gas emissions, investment and prices in the EU countries, with a focus on the "electricity, gas, steam and air conditioning supply" industry. We use a panel data cointegration approach for the period 2000 to 2017 and we document a long-run relationship between overall greenhouse gas emissions for the electricity and gas industry and the investment and price dynamics within this industry. More precisely, our findings show that the gross fixed capital formation in the electricity and gas industry negatively impacts the greenhouse gas emissions. Further, the price dynamics has a positive influence on emissions, stating that the contraction of electricity consumption following the recent global crisis generated a disinflation process in this industry and a reduction of greenhouse gas emissions. These results are robust regarding the way we compute the greenhouse gas emissions. The outcome of this paper has noteworthy policy implications for the EU environmental and energy regulators and policy makers.