Digitalization in Europe: A potential driver of energy efficiency for the twin transition policy strategy

Abstract

This paper aims to study the impact of digitalization on energy efficiency in Europe, where institutions are committed to promote both digital transformation and energy transition by implementing the European Twin Transition, ETT [1]. The paper starts by empirically analysing the state of play of the Twin Transition across European Member States (MS) by mapping the Digital Economy and Society Index (DESI), its sub-indices and the energy productivity. We then discuss the impact of the abovementioned digital indicators on energy productivity growth in 26 European MS during the period 2016–2020 by applying a system GMM model. The results show a significant and positive impact of digitalization on energy efficiency and relevant complementarities across diverse digitalization dimensions. This study contributes in an original manner to the literature by applying for the first time DESI and its sub-indices in a European twin transition analysis; moreover, empirical insights have important policy implications because all the variables considered are parts of the European policy targets.

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