Does the transition to renewable energy increase inflation in European countries?

Abstract In European countries, because of the expensiveness of the technology required for the use of renewable energy sources, it can cause inflation by constantly increasing prices due to cost increases in the short term. However, in the long term, costs can be reduced by providing the necessary technological infrastructure, saving energy thanks to this technological development, eliminating harmful effects on the environment. In this way, renewable energy sources have a long-term effect on inflation. This study aims to examine the long-term relationship between renewable energy and inflation in European Union countries. It is thought that this study will contribute to the literature, since there are no studies that examine the relationship between renewable energy and inflation, among the national and international studies, which deal with the European Union countries and examine the PMG and CCE co-integration analyses. According to the results of the PMG cointegration analysis, while there is no significant relationship between inflation and renewable energy in the short term, renewable energy affects inflation negatively in the long term. According to the results of the CCE cointegration analysis, in the long run, renewable energy affects inflation negatively in Sweden, the United States, and Luxembourg.