Insights into CO2 emissions in Europe in the context of COVID-19: A panel data analysis

Abstract

This paper analyzes the dynamics of CO2 emissions over the last decade for a large group of 25 European countries, an issue that is at the center of the ecological transition project involving various commitments (COP21, COP26, G20 meetings, etc.). To this end, our model measures the repercussions of energy price shocks (oil, gas, coal) for carbon emissions, as well as changes in industrial production and sustainable development in the context of the coronavirus pandemic. Using annual data for 23 EU countries, together with Russia and the UK, our findings show that CO2 emissions reacted significantly to oil and coal price shocks and vary with industrial production cycles. We quantified this reaction while computing the related elasticities. Further, while a significant reduction in CO2 emissions was observed during the COVID-19 pandemic, the stepping up of investment in sustainable development and renewable energy consumption also had a negative impact on CO2 emissions. This suggests that the key driver to reducing the risk of climate change and lowering high carbon dioxide (CO2) emissions involves significant commitment to sustainable development.