CO2 Emissions and Energy Technologies in Western Europe
Economic upswing phases are strongly linked to a rise in CO2 emissions. The effect is strongest in countries that depend on energy-intensive sectors, this latest EconPol Working paper finds. The research further shows that an increase in the share of renewable energy in the primary energy supply during an upswing has the greatest impact on reducing CO2 emissions. According to the authors, the study’s results lead to an important conclusion: European environmental policy should be adjusted over the economic cycle, e.g. by introducing procyclical green taxation.
In this paper we investigate the path to the green transition in Europe. In so doing, we implement an empirical model of dynamic panel data on a sample of sixteen Western European countries over the period 1980 to 2019. The model is consistent with various features of neo-classical growth theory incorporating energy use. Our focus is on the short-run determinants of carbon emissions within that set of countries. We provide evidence that the relationship between economic activity and CO2 emissions is strong in economies where economic booms depend on energy-intensive sectors. Also, the mitigating role of renewable energy technologies is key when energy intensity rebounds. These circumstances may constitute a challenge for the climate transition goals targeted in the EU’s Recovery Plan, whose main objective at this very moment is to mitigate the economic and social impact of the coronavirus pandemic.
J. Barrera-Santana, Gustavo A. Marrero, Luis A. Puch, Antonia Díaz: "CO2 Emissions and Energy Technologies in Western Europe", EconPol Working Paper 65, June 2021