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

Marco Dueñas, Antoine Mandel

TL;DR

The paper addresses whether EU low-carbon expenditures under the European Structural and Investment Funds reduce regional greenhouse gas emissions. It combines trend-cycle decomposition via the Hodrick-Prescott filter with long-lag panel estimates and region-specific development classifications to assess both long-run and short-run effects across EU regions from 2007–2022. The results reveal substantial regional heterogeneity: in less-developed regions, long-run emissions trends may rise with low-carbon spending, while developed and transition regions show weak or no long-run reductions, though some short-run reductions or volatility-damping effects occur in certain periods. These findings suggest that cohesion-policy climate investments do not automatically decarbonize and highlight the need for place-based strategies and better causal identification of policy effects.

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.

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

TL;DR

The paper addresses whether EU low-carbon expenditures under the European Structural and Investment Funds reduce regional greenhouse gas emissions. It combines trend-cycle decomposition via the Hodrick-Prescott filter with long-lag panel estimates and region-specific development classifications to assess both long-run and short-run effects across EU regions from 2007–2022. The results reveal substantial regional heterogeneity: in less-developed regions, long-run emissions trends may rise with low-carbon spending, while developed and transition regions show weak or no long-run reductions, though some short-run reductions or volatility-damping effects occur in certain periods. These findings suggest that cohesion-policy climate investments do not automatically decarbonize and highlight the need for place-based strategies and better causal identification of policy effects.

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.
Paper Structure (14 sections, 3 equations, 2 figures, 9 tables)

This paper contains 14 sections, 3 equations, 2 figures, 9 tables.

Table of Contents

  1. Introduction
  2. Decoupling emissions: related literature
  3. Data and methods
  4. Data
  5. Methodology
  6. Results
  7. Effect on emissions trend
  8. Effect in the emissions cycle
  9. Effect by type of gases
  10. Discussion
  11. Conclusions
  12. Low-carbon economy definitions by ESI programmes
  13. Estimation results modelled expenditures
  14. Instrumental variables (IV/2SLS)

Figures (2)

  • Figure 1: Maps depicting the distribution of total ESI funds for the 2007-2013 and 2014-2020 programmes. Left: the total funds expenditures per capita related to the 2007-2013 program. Centre: the total funds expenditures per capita related to the 2014-2020 program. Right: the regional eligibility to access ESI funds, according to the 2014-2020 programme. Expenditure values correspond to own estimations, and all maps are at NUTS 2 level.
  • Figure 2: Maps depicting GHG emission indicators, Funding Eligibility and Total Low-Carbon Economy expenditures allocation for the 2007-2013 and 2014-2020 Programmes. These maps illustrate the geographical distribution of regions according to their emissions and total expenditure within each ESI funding period. All maps are at NUTS 2 level.