Economic growth, trade, and greenhouse gas emissions in the european union - investigating pollution leakage

Abstract

Methods. This research employs econometric modeling and panel data analysis to investigate the intricate relationship between economic growth, environmental policies, and greenhouse gas (GHG) emissions within the European Union (EU). Panel data from 27 EU countries during the period from 2008 to 2021 is used to assess the impact of various factors on GHG emissions, including per capita GDP, primary energy consumption, renewable energy share, technological development, and extra-EU trade. Results. The study reveals that there is a positive correlation between GDP per capita and emissions, suggesting that the EU has not yet reached full decoupling of GDP growth and growth in GHG emissions. Increased primary energy consumption is associated with higher emissions, while a greater proportion of renewable energy sources is linked to reduced emissions. Technological advancements are found to mitigate GHG emissions. Importantly, the research uncovers a positive relationship between extra-EU trade and emissions, indicating the pollution leakage through trade. Novelty. This study contributes to the literature by offering a comprehensive examination of the dynamics between economic growth, changes in energy consumption, technological advancement, trade patterns, and GHG emissions within the EU. A more specific international trade variable is introduced into the model – the trade balance of EU countries with the outside EU countries. It explores the concept of pollution leakage, shedding light on how changes in foreign trade may impact emissions levels. Practical Value. The findings have significant policy implications, highlighting the need for a holistic approach to environmental policymaking within the EU. The study emphasizes that while progress has been made in adopting cleaner technologies and supporting renewable energy, challenges remain, including the potential for pollution leakage through international trade. This insight underscores the importance of globally impactful environmental policies and international cooperation to address GHG emissions effectively.