International Conference on Economics, Finance & Business, Rome

URBAN CONTEXTS AND RENEWABLE ENERGY SOURCES: INTERACTION EFFECTS ON CLIMATE-RELATED ECONOMIC LOSSES IN THE EU

MARTINA MATÉ, MARIJANA JERIĆ

Abstract:

Drawing on two decades of aggregated EU-27 data, from 2000 to 2022, this paper quantifies the conditional impact of five types of renewable energy - primary solid biofuels, renewable municipal waste, geothermal energy, biogases, and solar thermal energy - on climate-related economic losses, highlighting the role of urban population share as a moderating factor. Climate losses are measured using a five-year moving average of economic damages, expressed in constant 2022 prices, to account for volatility and capture medium-term structural trends. The empirical strategy employs linear regression models with interaction terms between each renewable energy variable and urbanization, while GDP per capita acts as controlling variable. Although GDP per capita is included in all specifications, it does not show statistically significant effects, suggesting that income levels alone are not a sufficient determinant of climate resilience. In contrast, urbanization systematically conditions the effectiveness of renewable deployment. Specifically, primary solid biofuels and renewable municipal waste demonstrate significant negative effects on climate losses in less urbanized contexts, while their mitigating influence declines or becomes negligible as urban density increases. Similar context-dependent patterns are observed for geothermal energy and biogases, whereas solar thermal energy displays weaker and more uncertain effects across all urban contexts. The conditional effects are visualized through marginal effects plots, allowing a clear representation of how the relationship between energy source and climate outcome shifts across levels of urbanization. These findings provide empirical evidence that the performance of renewable energy sources is not spatially neutral. Accordingly, the study contributes to the environmental economics literature by advancing the idea that climate and energy policy should be spatially adaptive. The results support place-based strategies within the framework of the European Green Deal, emphasizing that tailoring interventions to demographic realities can enhance climate resilience and policy efficiency.

Keywords: Renewable Energy Sources, Climate-Related Economic Losses, Urbanization