GHG emissions in the EU-28. A multilevel club convergence study of the Emission Trading System and Effort Sharing Decision mechanisms

Abstract

The European Union is engaged in the fight against climate change. A crucial issue to enforce common environmental guidelines is environmental convergence. States converging in environmental variables are expected to be able to jointly develop and implement environmental policies. Convergence in environmental indicators may also help determine the efficiency and speed of those policies. This paper employs a multilevel club convergence approach to analyze convergence in the evolution of greenhouse gas (GHG) emissions among the European Union (EU)-28 members, on a search for countries transitioning from disequilibrium to specific steady-state positions. Overall convergence is rejected, with club composition depending on the specific period (1990–2017, 2005–2017) and emissions categories (global, Emission Trading System (ETS), Effort Sharing Decision (ESD)) analyzed. Some countries (e.g. the United Kingdom and Denmark) are consistently located in clubs outperforming the EU's average in terms of emissions reductions, for both the whole and the most recent periods, and for both ETS and ESD emissions. At the other end, Germany (with a large industrial and export basis), Ireland (with the strongest gross domestic product (GDP) growth in the EU in recent years) and most Eastern EU members have underperformed after 2005, almost reversing their previous positions when the study begins in year 1990. Member States show large mitigation potentials in both ETS emissions (e.g., in the aviation sector) and the multiplicity of sectors (especially road transport) covered by the ESD. The presence of multiple convergence clubs, reinforced by persistence of the results across the various periods and sectors analyzed, may also indicate the convenience of more differentiated, specific policies and regulations with a view to reducing heterogeneity among member states. Innovation in production and business systems, the promotion of green energy, collaboration and efficient technology transfer between countries, a transparent regulatory framework, and the promotion of green attitudes are key measures for reducing GHG emissions, especially in those countries with the worst performance.