Unveiling the impact of green energy on green productivity: A focus on hydrogen and the green transition in European regions

Abstract

The transition towards sustainable economic growth has gained increasing attention due to the urgency of the climate crisis and the need to reduce resource dependency. This study examines the relationship between green energy production and green total factor productivity (GTFP), a metric incorporating environmental factors into traditional productivity measures. Using a panel dataset of 221 European NUTS2 regions across 10 sectors from 2009 to 2021, we estimate GTFP through the Malmquist-Luenberger productivity index. Our analysis focuses on green energy production, particularly hydrogen energy, and its potential impact on GTFP by reducing emissions and optimizing resource use. To ensure robustness, we apply an instrumental variable (IV) approach. The results indicate a positive relationship between green energy production and GTFP. While hydrogen energy also exhibits a positive effect, it does not reach statistical significance. However, we find that the interaction between green and hydrogen energy enhances GTFP, suggesting spillover effects between these technologies. These findings offer valuable policy insights, emphasizing the importance of integrating green energy sources into economic growth and reducing emissions while supporting the successful adoption of renewable technologies.