Determinants of energy intensity in the European Union: A panel data analysis

• Energy intensity determinants in the EU-28 were analysed for the period 1990–2012.
• Research is based on empirical panel data analysis.
• Energy prices, GDP and energy consumption significantly affect energy efficiency.
• Taxes are an effective policy tool for increasing energy efficiency.

The aim of this article is to analyse the energy intensity in EU-28 member states for the period 1990–2012, establish its determinants, and estimate the size and statistical significance of the effect of each determinant on energy intensity. In order to achieve this, a panel data approach was designed for EU-28 member states. The estimated model showed that energy prices, energy taxes and GDP (gross domestic product) per capita have a negative influence on energy intensity, while the growth of gross inland consumption and final energy consumption per capita positively affect energy intensity. The biggest impact on energy intensity was estimated for the price of electricity, indicating that the level and structure of this determinant should be considered and used as a valuable energy policy tool for improving energy efficiency. This policy conclusion is also supported by the fact that Denmark, Germany and Italy have the highest share of energy taxes in the structure of the final electricity price, and at the same time the lowest energy intensity.