Revisiting the nuclear energy-income nexus in Europe: an application of the JKS panel causality test with cross-sectional dependence and heterogeneity

The EU countries are facing a burning debate with regard to the nature and amount of decarbonized energy used within the supply mix. This study highlights the role of nuclear power and renewable energy use in achieving economic growth in Europe. Capital, labour, exports, and trade openness series are included within a multivariate framework spanning the 1986 to 2019 period and a two-step methodology is implemented. First, a panel causality analysis over the top 10 nuclear energy-consuming EU countries is conducted using the panel non-causality test from Juodis, Karavias and Sarafidis (2021), robust under large cross-sectional and time-series dimensions, as well as heterogeneous coefficients. Second, a sub-set of three states (Germany, Spain, and France) that are different in terms of long-run nuclear energy policies is selected and a single-country time-series assessment is performed using the vector error correction model, causality tests, as well as impulse response functions. Panel EU results support the “conservation hypothesis” for both nuclear and renewable resources, without feedback effect. The country-level estimates fail to provide homogeneous results since no causal link is found between economic growth and renewable energy use for Spain and France (confirmation of “neutral hypothesis”). A weak causality from renewable energy use to output growth is observed for Germany, while economic growth enhances the nuclear energy consumption in Spain