Determinants of energy consumption in the tertiary sector: Evidence at European level

The present paper studies the evolution of the European Union (EU) tertiary sector in the context of the 2020, 2030 and 2050 EU energy and climate targets. It uses official data (mainly from Eurostat) to analyse the energy consumption and energy efficiency patterns during the period from 2000 to 2019. With the highest growth rate among the most important economic sectors during the studied period (21%), the tertiary sector is expected to have an increasingly important role in the green energy transition. Data on energy consumption trends are included, showing among others that primary and final energy consumption decreased by 5.6% and by 1.1% from 2000 to 2019, as well as the main energy policies and possible determinants, like the economic situation, the employment, the climatic conditions, and the building characteristics. Based on econometric modelling and decomposition analysis, we highlight the indicators that influence specific determinants on consumption trends and examine the impact of policies and technology improvements. The study of these determinants identifies other perspectives beyond the energy demand in the tertiary sector. The econometric analysis, based on panel dataset at Member States level, investigates the main drivers of energy consumption including climate, economic and policy indicators. Overall, the paper contributes to a better analysis of the EU tertiary energy consumption and efficiency, its driving factors, the effectiveness of implemented strategies and measures, and suggests on future research and on new policies to be developed. Policies need to be strengthened to meet EU 2030 targets and to develop the conditions to also achieve climate-neutrality by 2050. •Tertiary energy consumption increased from 2000 to 2019 in the EU and UK.•Total worked hours were found to be a key driver of energy consumption.•Energy efficiency improvements play a crucial role in driving down consumption.•Weather and climatic variations have a notable effect on the tertiary consumption.•Effective energy efficiency policies have had a major impact on energy trends.