When it comes to climate protection, the European Union (EU) and its member states play a leading role internationally. Not only do they act as a driving force in meeting the targets of the Paris Agreement; they have also better defined their own ambitious climate targets. The EU aims at producing 55% fewer greenhouse gas emissions by 2030 (compared to 1990) and achieving climate neutrality by 2050. But there is still a long way to go. A new study shows that the EU could reach its climate targets much faster if the member states were to exchange information more effectively, for example, on energy-related technologies.
Although the 27 EU member states are pursuing the same climate protection goals, the status quo reveals major differences with regard to their own domestic energy policies: While Sweden, Finland, and Latvia, for example, already cover most of their energy needs with renewable energy, Eastern European countries continue to primarily use fossil fuels. The reasons behind this mix of energy sources are rooted in the geographic location, natural resources, history, and the political traditions of each respective country. Depending on their energy sources, they will show large differences in their CO2 balances. When it comes to fossil fuels, for example, coal and oil increase CO2 emissions significantly, while natural gas has barely any impact on CO2 emissions. Every country’s individual CO2 balance has an impact on the overall balance of the EU, however, and, therefore, also on its status as a role model on the international stage.
According to the new study, there are strong spillover effects in neighboring regions within the EU. Methods of energy production in one country are, for example, transferred across borders. In countries where fossil fuels have so far been the preferred energy sources, the expansion of renewable energies is being promoted when their use is already feasible in adjacent regions. According to the study, the largest capacities to develop renewable energies lie in the expansion of biomass as a source, while the potential of solar and wind energy is lower.
Professor Mei Wang, Chair of Behavioral Finance at WHU – Otto Beisheim School of Management and co-author of the study, sees great potential in more intensive exchanges between EU member states to speed up effective climate protection. "Since there are no trade borders between member states in the domestic market, the transfer of energy technologies, technical personnel, and financial resources can be efficiently accelerated," says Professor Wang. Manufacturers of efficient power plants for renewable energies, for example, could make the technology of their plants more easily accessible to neighboring countries, i.e., where similar geographical conditions can be found. Additionally, technical personnel could be trained abroad, or specialists could help build modern and climate-friendly facilities in the regions that border them (within the EU). This way, renewable energies could replace fossil fuels as the main source of energy in many regions—and do so much more quickly than previously assumed.
However, to make this possible, it is imperative that EU politics fulfill its task and create conditions for a better cross-border cooperation. "As a supranational political and economic union, the EU can introduce all policies and legislation necessary to achieve this. One way to do so is, for example, to simplify access to funding for cross-border projects," Professor Wang added. She also found that the policy debate on CO2 emissions and energy sources should be shaped more by science and less by ideologies. "Empirical data for cost-benefit analyses of individual energy sources must be systematically collected before a political decision is made," she explained.
Tips for practitioners
- As a policymaker, you should rely on empirical data rather than on personal ideologies.
- Make good use of the spillover effects within the EU to replace fossil fuels faster.
- Share technological know-how within the EU and exchange skilled personnel across borders. This way, renewable energy sources can be used more quickly and efficiently.
- Liu, Y./Xie, X./Wang, M. (2023): Energy structure and carbon emission: Analysis against the background of the current energy crisis in the EU, in: Energy, Vol. 280, 2023. DOI: https://doi.org/10.1016/j.energy.2023.128129
Authors of the study
Professor Mei Wang
Professor Mei Wang is an expert on behavioral and cultural finance. She is holder of the Chair of Behavioral Finance at WHU – Otto Beisheim School of Management. Her studies focus on the impacts of culture on individual preferences, decisions, and markets.
Yang Liu is currently a postdoctoral researcher at the chair of innovation and sustainable management at the University of Augsburg and product manager at the Landesbank Baden-Württemberg. His research focuses on energy economics and finance, climate change, and sustainable development.