Working Papers,
Copenhagen Business School, Department of Economics

Abstract: The European Union has committed to make Europe the first climate-neutral continent by 2050. Reaching this objective implies massive changes in the economies of the region. The biggest challenge of this green transition is to make sure that it happens without sacrificing economic progress and guaranteeing justice and inclusiveness. This pledge requires that every country be capable of addressing the trade-offs between the targets while remaining committed towards the common decarbonisation goal. This paper analyses the success with which European countries are carrying out the energy transition. We propose an enhanced hyperbolic distance function and a stochastic frontier analysis approach to model the joint attainment of economic development, environmental sustainability, and energy equity. We apply our model to an unbalanced panel dataset of 29 European countries for the period 2005-2018. Our estimates show that the average performance of the European economies has improved throughout the studied period. However, the patterns of progress have been different, showing the non-EU-15 countries a steeper evolution than the EU-15 countries. Our results also highlight the pivotal role of a sustainable economic development with clean energies for both slashing CO2 emissions and fostering energy equity. Moreover, we find sigma convergence, being this slightly higher for the EU-15 countries. Additionally, we obtain absolute and conditional beta convergence for both non-EU-15 and EU- 15 countries. Finally, we show that a higher share of renewable energy sources helps countries that are lagging behind to reach their optimal level of performance.

Keywords: Economic development; Environmental sustainability; Energy equity; Enhanced hyperbolic distance function; Stochastic frontier analysis

JEL-codes: C50; L50; L90; Q40; Q50

Language: English

27 pages, September 20, 2023

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