Energy consumption in the Balkans - an empirical analysis on the main drivers.

The planet on which we are living is currently under an imminent threat. Population growth, massive digitalization, environmental pollution, increased scarcity of resources, and the greenhouse effect are putting our future and the future of generations to come at risk. As more and more governmental reforms are aiming to diversify the sources of energy production and many international players are working on market coupling to enhance cross-border cooperation, the question that arises is what developing countries can do in light of an energy crisis. Such so-called transition economies are working hard to promote growth, sustainable development and increase competitiveness in the European arena. Said that, it becomes important to know how market dynamics shape the energy demand, and thus the energy consumption in these countries. To answer this question, this paper employs secondary data from 2007-2021. The empirical analysis builds on unbalanced panel data and studies the main statistically significant determinants steering energy consumption across Balkan region, by examining the case of Albania, Serbia, Bulgaria, Republic of North Macedonia, and Bosnia & Herzegovina through a Fixed Effects model. A wide pool of variables related to innovation, political climate, economy, and finance were chosen to explain the energy consumption in the region. Using a general-to-specific approach, we were able to obtain a model with three regressors, all of them critical in capturing the variability in energy consumption. The results showed that in developing countries the main drivers of energy consumption are HDI, FDI and Innovation Index. This research provides an up-to-date picture on the dynamics of the energy markets in the region by providing a comprehensive analysis, which accounts for a variety of factors and adequate methodology. It is especially useful for policy makers to have a forward-looking approach and embed the results of such a study in their projections, analysis, and future decisions. [ABSTRACT FROM AUTHOR]