Does the European Union energy policy support progress in decoupling economic growth from emissions?

Abstract

This study investigates the impact of the European Union (EU) energy policy on decoupling economic growth from emissions in the EU countries in the period between 1995 and 2017. The following three types of greenhouses gas emissions are considered in the study: emissions covered by the EU Emissions Trading System (EU ETS), production-based emissions (PBA), and consumption-based emissions (CBA). Decoupling emissions from the output is assessed in the successive phases of the EU ETS for trend components in the long run and for cyclical components in the short run.The results obtained reveal an ambiguous role played by the EU energy policy in long-term decoupling. On the one hand, there has been progress in decoupling economic growth from emissions covered by the EU ETS and production-based emissions in the EU-15 and in the new EU countries. On the other hand, in the case of consumption-based emissions, no progress has been recorded in both groups of countries. The results confirm a significant difference between the EU-15 and the new EU countries only when long-term decoupling is considered. The negative relationship between emissions covered by the EU ETS and production-based emissions and output is much stronger in the EU-15 countries than in the new EU countries.