Natural gas supply cuts and searching alternatives in Germany: A disaggregated level energy consumption analysis for environmental quality by time series approaches

Abstract

By considering the search for alternatives against Russia's natural gas supply cuts, this study explores the impact and causality of disaggregated level energy consumption indicators on environmental quality. Hence, the study investigates Germany, which is the leading economy in Europe and highly dependent on Russia's natural gas supply, by using carbon dioxide (CO2) emissions as the environment indicator, including annual data from 1970 to 2021, and applying novel time series approaches. In the empirical examination, Granger causality-in-quantiles (GCiQ), quantile-on-quantile regression (QoQR), and multivariate adaptive regression splines (MARS) are applied as base models while quantile regression (QR) and dynamic ordinary least squares (DOLS) are used for robustness. The empirical findings show that (i) there are causal impacts of disaggregated level energy consumption indicators on CO2 emissions; (ii) renewable energy and hydroelectricity consumption have a decreasing impact, whereas natural gas, coal, and oil energy consumption have an increasing impact on CO2 emissions; (iii) although nuclear energy has been discussed as a potential alternative, nuclear energy does not have a significant impact in decreasing CO2 emissions; (iv) natural gas consumption has an interaction with renewable energy, hydroelectricity, and coal energy consumption; (v) the power of disaggregated level energy consumption indicators on CO2 emissions vary according to quantiles, thresholds, and interactions between energy consumption indicators; (iv) alternative models validate robustness of the results obtained. Thus, the results imply that the most appropriate alternative is coal energy consumption in the short-term and renewable energy consumption in the long-term to compensate for Russia's natural gas supply cuts, whereas nuclear energy consumption is not a real alternative for Germany.