Are EU low-carbon structural funds efficient in reducing emissions?

TL;DR

This study evaluates the impact of EU low-carbon funds on regional emissions, revealing heterogeneous effects with increased emissions in less developed regions and weak effects elsewhere, highlighting regional disparities.

Contribution

It provides a nuanced analysis of EU low-carbon expenditures' effectiveness across different regions using advanced econometric methods.

Findings

In less developed regions, emissions increase long-term after investments.

In transition and developed regions, effects are weak or insignificant.

Results vary when analyzing different greenhouse gases.

Abstract

We investigate the effectiveness of low-carbon expenditures from the European Structural and Investment Funds in reducing greenhouse gas emissions across EU regions. Using trend and cycle decomposition of per capita emissions and emissions intensity, along with a panel data approach that incorporates long lags to mitigate reverse causality, we find highly heterogeneous effects. In less developed regions, investments are associated with long-term increases in per capita emissions, whereas in transition and developed regions, the effects are weak or not significant. When disaggregated by gas type, results remain inconsistent. Our findings highlight that regional disparities challenge the effectiveness of EU climate efforts.