Eurostat estimates that in the European Union CO2 emissions from fossil fuel combustion have declined 2.5% in 2018 compared to the year before. This continues a long-term trend: calculations by the International Energy Agency show for EU28 a decline of 20.7% between 1990 and 2016. Considering that over this period economic activity grew significantly, the carbon intensity declined 48.7% [1].

As shown by the first chart, there is however a wide dispersion between countries. Latvia, Malta and Estonia saw big increases, whereas Portugal, Bulgaria, Ireland and Germany experienced considerable declines.

CO2 emissions vs real GDP

To some degree, differences in real GDP growth play a role (there is a statistically significant relationship between growth and change in emissions) but it should be emphasized that countries which saw a reduction in emissions still had positive growth, implying that the CO2 emission intensity of economic activity declined further.

The low R2 of the regression reminds us that many factors influence emissions: weather conditions, domestic production versus imports (an increased share of imported electricity lowers emissions in the importing country), the mix in terms of primary energy source (alternative, fossil, nuclear), population size, transport infrastructure, etc. The level of economic development as measured by GDP per capita also plays a role, as shown in the second chart. As people get richer, the per capita CO2 emissions from fossil fuel combustion increase.

Yet, the dispersion, for a given level of per capita GDP, shows that other factors may be at work as well, such as the use of coal versus nuclear energy as a primary energy source. Moreover, as countries become richer, the sector composition of value added changes and services tend to gain in importance. Considering that industry has a bigger carbon emission footprint than services, this may explain why, as shown in chart 3, there is a negative relationship between per capita GDP and CO2 emissions per unit of GDP.

UE CO2 emissions

The diversity of the drivers of the carbon footprint of a country may be a challenge for policy in coming to grips with global warming and entails finding a balance between the level of energy independence of a country, security, emissions, the costs of change whilst taking into account issues such as the intermittency of wind and solar energy. The necessity to make significant progress is beyond doubt however as illustrated by the request of eight countries (Belgium, Denmark, France, Luxembourg, the Netherlands, Portugal, Spain and Sweden) to EU members to achieve net-zero emissions by 2050 [2].

[1] Calculated as the ratio of CO2 fuel combustion emissions and real GDP. Source: International Energy Agency, COâ‚‚ emissions from fuel combustion highlights (2018 edition)

(2] Eight nations push for net-zero emissions in bloc by 2050, Financial Times, 8 May 2019