Does environmental quality reflect on national competitiveness? The evidence from EU-15

Abstract

The European Union has set the target that by 2020 harmful emissions and energy consumption should be reduced by 20% compared to the 1990s. This paper examines the impacts of environmental quality on two parameters of national competitiveness (exports and GDP per capita). The study focuses on the EU-15 countries and covers the period from 1960 to 2013. Even though the analyzed economies are developed countries which are the leaders in environment protection, they are still also the leading emitters of greenhouse gases. The paper uses traditional econometric techniques to test the relations between energy use, CO2 emissions, exports and GDP. The results show that the variables are co-integrated. In addition, energy-led growth hypothesis is valid in most of the analyzed economies. The results have also shown that increased CO2 emissions reduce economic activity and export performance. Finally, we will conclude that there are two tasks for future policy makers: first, to strengthen renewable-energy goals, and second, to adjust the economic structure towards less harmful emissions. In such circumstances, we could expect the economies to further develop clean technologies and to obtain their benefits for national competitiveness.