Economic Growth, Digitalization, and Energy Transition: Dynamic Evidence on Sustainability in European Economic Area Countries

Abstract

This study examines the relationship between economic development, information and communication technology, renewable energy, fossil energy, and sustainability across 20 European Economic Area countries over the period 2000–2025. The analysis employs a panel Vector Autoregressive model to capture temporal interdependence among economic growth, its nonlinear component, digital development, and energy consumption. Panel unit root tests establish appropriate stationarity properties, while diagnostic tests indicate no major concerns regarding residual normality, serial correlation, or heteroskedasticity. The panel Granger causality results demonstrate significant predictive relationships among sustainability, economic growth, information and communication technology, fossil energy, and renewable energy, confirming that these dimensions form an interconnected dynamic system. The panel Vector Autoregressive estimates further show that economic growth and its squared term have significant lagged relationships with adjusted net savings, providing evidence of nonlinear development–sustainability dynamics. Information and communication technology exhibits differentiated effects across time, with its initial relationship with sustainability differing from its subsequent relationship, while also interacting dynamically with economic growth and energy consumption. Renewable energy demonstrates positive lagged relationships with adjusted net savings and negative interactions with fossil energy, indicating an important link between energy transition and sustainability. Fossil energy displays persistent dynamic effects and significant interactions with economic activity, digital development, and renewable energy. The findings demonstrate that sustainability in European Economic Area countries is shaped by the joint evolution of economic development, technological transformation, and energy structure.