Economic growth in contrast to GHG emission reduction measures in Green Deal context

Abstract

The global economy is on the verge of one of the greatest transitions in modern history. The ability to ensure sustainable economic development and prosperity while significantly reducing consumption of energy resources and generated greenhouse gas emissions is a global challenge that affects every country in the world. To assess whether economies are ready for this challenge, there is an urgent need to examine this dual relationship between economic growth and climate change measures. European Green Deal strategy has set the ambitious goal of Europe becoming the first climate-neutral continent by 2050, boosting competitiveness and long-term prosperity of the economy. Kaya identity and LMDI decomposition is applied to examine how European Union countries have been coping with these countereffects historically. The decomposition analysis is conducted for the EU-28 (including the UK) countries for a 10-year study period from 2010 to 2019. This study analyses the main drivers of changes in GHG emissions in European Union and estimates the progress made in implementing the Green Deal targets. The results show that in the EU, energy efficiency improvements have twice the effect on reducing GHG emission compared to RES strategies. The effect of economic growth was the main offsetting factor hindering the achievement of larger GHG emission reductions. More in-depth ex-ante and ex-post investigation is performed for the Baltic States. A novel forecasting technique is applied to project GHG emissions under three different development scenarios, such as the scenario with existing measures, the scenario with additional measures, and the business-as-usual scenario. The results show that the current climate policies in the Baltic States are not sufficient to achieve the 2030 emission reduction targets and that greater efforts should be made to enforce climate mitigation measures in the economies.