Economic determinants of energy demand in Post- Soviet independent countries

Abstract

This paper explores the interconnectedness of the economy, environment, and energy sectors at the macro level. While the impact of environment on energy consumption is well-studied, this research focuses on identifying the economic determinants of energy demand. Understanding these determinants is crucial for implementing effective strategies to manage energy security, reduce greenhouse gas emissions, transition to cleaner energy sources, and address energy poverty. Specifically, the study aims to quantitatively analyze the impact of macroeconomic factors on energy demand in 20 post-Soviet independent countries. The paper by Salahodjaev et al. and Paramati et al. are the main literature this research is based on. To investigate the relationship between the identified determinants and energy demand, this study utilizes a multiple logistic- linear regression model. The model is applied to secondary unbalanced panel data spanning from 1992 to 2022. In order to analyze the data, a panel unit root test, cointegration test, and causality test are performed. Through this research, significant determinants of energy consumption as economic growth, foreign direct investment, trade openness, and industrialization are identified. The findings of this research provide insight for policymakers when making decisions regarding energy infrastructure investments. Policymakers can utilize these insights to promote renewable energy sources, diversify energy sources, optimize energy distribution systems, and address challenges related to sustainable development.