Factors influencing the low-carbon transition: Evidence from the EU economies

Abstract

Decarbonizing the economy effectively mitigates climate change, accelerates the transition to sustainable development, and corresponds to the Kyoto Protocol and Paris Climate Accords. The key objective of this research is to estimate the influence of different social, economic, political and technological factors on decarbonization processes. The scientific novelty of the study is that it investigates decarbonization from a dual perspective, assessing it both in terms of greenhouse gas (GHG) emissions levels and carbon intensity of gross domestic product (GDP). This research applies random-effects generalized least squares regression, fixed-effects robustness checks and dynamic System GMM for 27 EU economies in 2013–2021. The results indicate that (i) renewable energy is a vital decarbonization driver (a 10-percentage-point increase in the share of renewable energy leads to a decrease in the amount of GHG emissions by 1.52 thousand metric tons and to a decrease in the carbon intensity of GDP by 0.14 metric tons/thousand USD). (ii) A larger service sector and higher technological employment also contribute positively to the low-carbon transition, while (iii) corruption acts as an important institutional barrier. (iv) GDP per capita is associated with lower carbon intensity and emissions, supporting the view that more advanced economies are better positioned to implement sustainable transformation. Research results provide specific policy implications for designing more effective climate and energy policies, including green finance development, virtual economy growth, and innovation implementation.