Energising EU Cohesion: Powering up lagging regions in the renewable energy transition

Többen, Johannes and Banning, Maximilian and Hembach-Stunden, Katharina and Stöver, Britta and Ulrich, Philip and Schwab, Thomas (2023): Energising EU Cohesion: Powering up lagging regions in the renewable energy transition. Published in:

Abstract

The European Green Deal mandates a substantial transformation of the energy sector, responsible for more than 80 % of total greenhouse gas emissions. This study investigates the economic implica-tions of achieving climate neutrality in the European energy sector in light of the EU's core goal of economic cohesion, i.e. harmonious economic development across European regions. Employing a novel multi-regional input-output model, our analysis reveals how the renewable energy transition affects European regions. Under complete decarbonisation, changes in value added per capita range from -2,450 Euro to +1,570 Euro, and employment levels fluctuate between -2.1 % and +4.9 %. On average, most regions experience positive effects, characterised by an average increase in value added per capita of 10 Euro and a 0.3 % rise in employment in 2050. Overall, rural regions with sub-stantial renewable energy potential derive the greatest benefits, while urban regions heavily reliant on carbon-intensive industries are more likely to experience adverse effects. This dynamic fosters economic cohesion by providing opportunities for lagging regions to catch up, yet also poses fresh challenges to achieving this goal. Therefore, cohesion policy must expand its scope to counter the adverse effects as well as leveraging opportunities created by the renewable energy transition in all European regions.

• Item Type: MPRA Paper
• Language: English
• Keywords: energy, transition, cohesion, inequality, regions
• Subjects: C - Mathematical and Quantitative Methods > C6 - Mathematical Methods ; Programming Models ; Mathematical and Simulation Modeling > C67 - Input-Output Models; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O11 - Macroeconomic Analyses of Economic Development; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q4 - Energy > Q43 - Energy and the Macroeconomy

References

Alves Dias, P., Kanellopoulos, K., Medarac, H., Kapetaki, Z., Miranda-Barbosa, E., Shortall, R., Czako, V., Telsnig, T., Cristina, V.-H., Lacal Arantegui, R., Nijs, W., Aparicio, I. G., Trombetti, M., Mandras, G., Peteves, S. & Tzimas, E. (2018): EU coal regions: opportunities and challenges ahead. EUR 29292 EN. Publications Office of the European Union (Ed.). JRC science for policy report JRC112593, Luxembourg. DOI: 10.2760/064809.

Bertelsmann Stiftung (Hg.) (2022): The Future of EU Cohesion – Effects of the Twin Transition on Disparities across European Regions. With the collaboration of Ambre Maucorps, Roman Römisch, Nina Vujanovic und Thomas Schwab. The Vienna Institute for International Economic Studies (wiiw); Bertelsmann Stiftung.

Bianco, V., Cascetta, F., Marino, A. & Nardini, S. (2019): Understanding energy consumption and carbon emissions in Europe: A focus on inequality issues. Energy 170, pp. 120–130. DOI: 10.1016/j.energy.2018.12.120.

DeAngelo, J., Azevedo, I., Bistline, J., Clarke, L., Luderer, G., Byers, E. & Davis, S. J. (2021): Energy systems in scenarios at net-zero CO2 emissions. Nature communications 12 (1), p. 6096. DOI: 10.1038/s41467-021-26356-y.

Dejuán, Ó., Portella-Carbó, F. & Ortiz, M. (2022): Economic and environmental impacts of decarbonisation through a hybrid MRIO multiplier-accelerator model. Economic Systems Research 34 (1), pp. 1–21. DOI: 10.1080/09535314.2020.1848808.

EEA (2023): EEA greenhouse gases — data viewer. European Environmental Agency (Ed.). https://www.eea.europa.eu/data-and-maps/data/data-viewers/greenhouse-gases-viewer, zuletzt aktualisiert am 09.11.2023.

Emissions Database for Global Atmospheric Research (EDGARv7.0) (2022): Community GHG Database (a collaboration between the European Commission, Joint Research Centre (JRC), the International Energy Agency (IEA)), and comprising IEA-EDGAR CO2, EDGAR CH4, EDGAR N2O, EDGAR F-GASES version 7.0. European Commission; Datasets (JRC). https://edgar.jrc.ec.europa.eu/dataset_ghg70.

European Commission (2018): Platform on Coal and Carbon-Intensive Regions – Terms of Reference.

European Commission (2019): Communication on the European green deal. https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:52019DC0640, last access 29.08.2023.

European Commission (2020): Sustainable Europe Investment Plan – European Green Deal Investment Plan, Brussels. https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52020DC0021, last access 30.08.2023.

European Commission (2021): EU Reference Scenario 2020 – Energy, transport and GHG emissions - Trends to 2050. Directorate General for Energy; Directorate General for Climate Action; Directorate General for Mobility and Transport, Luxembourg. DOI: 10.2833/35750.

European Commission (2022): Cohesion in Europe towards 2050 – Eighth report on economic, social and territorial cohesion. Publications Office of the European Union (Ed.), Luxembourg. https://ec.europa.eu/regional_policy/information-sources/cohesion-report_en, last access 15.2.23.

European Commission (2023): Accelerate the rollout of renewable energy. https://ec.europa.eu/commission/presscorner/detail/en/IP_23_2061, last access 15.09.2023.

Eurostat (2020): Carbon footprints (FIGARO application) – Product code: env_ac_co2fp. Eurostat (Ed.). https://ec.europa.eu/eurostat/web/products-datasets/-/env_ac_co2fp, zuletzt aktualisiert am 08.06.2023, last access 15.09.2023.

Eurostat (2021a): FIGARO - integrated global accounts for economic modelling. https://ec.europa.eu/eurostat/web/products-eurostat-news/-/edn-20210526-1, last access 12.06.2023.

Eurostat (2021b): Population on 1st January by age, sex, type of projection and NUTS 3 region – (Online data code: PROJ_19RP3). https://ec.europa.eu/eurostat/databrowser/view/PROJ_19RP3$DEFAULTVIEW/default/table, zuletzt aktualisiert am 15.09.2023, last access 15.09.2023.

Eurostat (2023a): Regional economic accounts – Branch and houshold accounts – Online data code: nama_10r_3empers, nama_10r_3gva. https://ec.europa.eu/eurostat/databrowser/view/nama_10r_3gva/default/table?lang=en, zuletzt aktualisiert am 18.04.2023.

Eurostat (2023b): SBS data by NUTS 2 regions and NACE Rev. 2 – Online data code: sbs_r_nuts06_r2. https://ec.europa.eu/eurostat/databrowser/view/SBS_R_NUTS06_R2/default/table?lang=en, zuletzt aktualisiert am 18.04.2023.

Flaute, M., Reuschel, S. & Stöver, B. (2022): Volkswirtschaftliche Folgekosten durch Klimawandel: Szenarioanalyse bis 2050 – Studie im Rahmen des Projekts Kosten durch Klimawandelfolgen in Deutschland. GWS Research Report 2022/02, Osnabrück. https://papers.gws-os.com/gws-researchreport22-2.pdf, last access 06.03.2023.

Gillingham, K. (2019): Carbon calculus – The true cost of reducing greenhouse gas emissions. International Monetary Fund (Ed.). Finance and Development. https://www.elibrary.imf.org/downloadpdf/journals/022/0056/004/article-a004-en.pdf.

Golan, A., Judge, G. G. & Miller, D. (1997): Maximum entropy econometrics – Robust estimation with limited data. Reprint. Series in financial economics and quantitative analysis. Wiley, Chichester.

Huang, S. & Koutroumpis, P. (2023): European multi regional input output data for 2008-2018. Scientific data 10 (1), p. 218. DOI: 10.1038/s41597-023-02117-y.

Intergovernmental Panel on Climate Change (IPCC) (2023): Synthesis Report of the IPCC Sixth Asssessment Report – Summary for Policymakers. https://report.ipcc.ch/ar6syr/pdf/IPCC_AR6_SYR_SPM.pdf, last access 30.03.2023.

International Energy Agency (IEA) (2021): World Energy Balances (database). https://www.iea.org/data-and-statistics/data-product/world-energy-balances.

International Energy Agency (IEA) (2023): Energy Technology Perspectives 2023. IEA - International Energy Agency, Paris. DOI: 10.1787/7c6b23db-en. International Labour Organization (ILO) (2018): World Employment Social Outlook 2018 – Greening with jobs, Geneva. https://www.ilo.org/wcmsp5/groups/public/---dgreports/---dcomm/---publ/documents/publication/wcms_628654.pdf, last access 30.08.2023.

International Labour Organization (ILO) (2022): GAIN Reports (Green jobs). https://www.ilo.org/global/topics/green-jobs/areas-of-work/gain/reports/lang--en/index.htm, zuletzt aktualisiert am 07.06.2023, last access 31.08.2023.

Kakoulaki, G., Kougias, I., Taylor, N., Dolci, F., Moya, J. & Jäger-Waldau, A. (2021): Green hydrogen in Europe – A regional assessment: Substituting existing production with electrolysis powered by renewables. Energy Conversion and Management 228, p. 113649. DOI: 10.1016/j.enconman.2020.113649.

Kiss-Dobronyi, B. & Fazekas, D. (2022): Modelling the decarbonisation of energy intensive industries in the EU – The potential effects of a carbon border mechanism. Report / European Trade Union Institute 2022, 03. European Trade Union Institute, Brussels, Belgium. https://www.etui.org/sites/default/files/2022-07/Modelling%20the%20decarbonisation%20of%20energy%20intensive%20industries%20in%20the%20EU_2022.pdf.

Kochanek, E. (2021): The Energy Transition in the Visegrad Group Countries. Energies 14 (8), p. 2212. DOI: 10.3390/en14082212.

Lahr, M. L. (2001): A Strategy for Producing Hybrid Regional Input-Output Tables. In: Lahr, M. L. & Dietzenbacher, E. (Hg.): Input-Output Analysis: Frontiers and Extensions, Palgrave.

Lindner, S., Legault, J. & Guan, D. (2012): Disaggregating Input–Output Models with Incomplete Information. Economic Systems Research 24 (4), pp. 329–347. DOI: 10.1080/09535314.2012.689954.

Luo, P., Tang, X., Dou, X., Liu, S., Ren, K., Jiang, Y., Yang, Z., Ding, Y. & Li, M. (2023): Uncovering the socioeconomic impacts of China's power system decarbonization. Environmental Impact Assessment Review 99, p. 107015. DOI: 10.1016/j.eiar.2022.107015.

Mandras, G., Conte, A. & and Salotti, S. (2019): Coal regions in transition: the RHOMOLO-IO indirect jobs estimates. European Commission. Territorial Development Insights Series JRC118641. https://publications.europa.eu/de/publication-detail/-/publication/de175603-896a-11e8-ac6a-01aa75ed71a1/language-en/format-PDF/source-73929634. DOI: 10.2760/064809.

Miller, R. E. & Blair, P. D. (2009): Input-output analysis – Foundations and extensions. 2nd ed. Cambridge University Press, Cambridge, New York.

Muhammad, A., Seale, J. L. J., Meade, B. & Regmi, A. (2011): International Evidence on Food Consumption Patterns – An Update Using 2005 International Comparison Program Data. United States Department of Agriculture (Ed.). Technical Bulletin 1929. https://www.ers.usda.gov/webdocs/publications/47579/7637_tb1929.pdf?v=3284.5, last access 2013.

O’Sullivan, M. & Edler, D. (2020): Gross Employment Effects in the Renewable Energy Industry in Germany – An Input-Output Analysis from 2000 to 2018. Sustainability 12 (15). DOI: 10.3390/su12156163.

OECD (2023): Regional Industrial Transitions to Climate Neutrality. OECD Publishing (Ed.). OECD Regional Development Studies, Paris. https://doi.org/10.1787/35247cc7-en, last access 31.08.2023.

Pfenninger, S. & Staffell, I. (2016): Long-term patterns of European PV output using 30 years of validated hourly reanalysis and satellite data. Energy 114, pp. 1251–1265. DOI: 10.1016/j.energy.2016.08.060.

Pirlogea, C. & Cicea, C. (2012): Econometric perspective of the energy consumption and economic growth relation in European Union. Renewable and Sustainable Energy Reviews 16 (8), pp. 5718–5726. DOI: 10.1016/j.rser.2012.06.010.

Riahi, K., van Vuuren, D. P., Kriegler, E., Edmonds, J., O’Neill, B. C., Fujimori, S., Bauer, N., Calvin, K., Dellink, R., Fricko, O., Lutz, W., Popp, A., Cuaresma, J. C., KC, S., Leimbach, M., Jiang, L., Kram, T., Rao, S., Emmerling, J., Ebi, K., Hasegawa, T., Havlík, P., Humpenöder, F., Da Silva, L. A., Smith, S., Stehfest, E., Bosetti, V., Eom, J., Gernaat, D., Masui, T., Rogelj, J., Strefler, J., Drouet, L., Krey, V., Luderer, G., Harmsen, M., Takahashi, K., Baumstark, L., Doelman, J. C., Kainuma, M., Klimont, Z., Marangoni, G., Lotze-Campen, H., Obersteiner, M., Tabeau, A. & Tavoni, M. (2017): The Shared Socioeconomic Pathways and their energy, land use, and greenhouse gas emissions implications: An overview. Global Environmental Change - Human and Policy Dimensions 42, pp. 153–168. DOI: 10.1016/j.gloenvcha.2016.05.009.

Sasse, J.-P. & Trutnevyte, E. (2023): A low-carbon electricity sector in Europe risks sustaining regional inequalities in benefits and vulnerabilities. Nature communications 14 (1), pp. 1–15. https://doi.org/10.1038/s41467-023-37946-3.

Scrucca, L., Fop, M., Murphy, T. & Raftery, A. (2016): mclust 5: Clustering, Classification and Density Estimation Using Gaussian Finite Mixture Models. The R Journal 8 (1), p. 289. DOI: 10.32614/RJ-2016-021.

Sievers, L., Breitschopf, B., Pfaff, M. & Schaffer, A. (2019): Macroeconomic impact of the German energy transition and its distribution by sectors and regions. Ecological Economics 160, pp. 191–204. DOI: 10.1016/j.ecolecon.2019.02.017.

Staffell, I. & Pfenninger, S. (2016): Using bias-corrected reanalysis to simulate current and future wind power output. Energy 114, pp. 1224–1239. DOI: 10.1016/j.energy.2016.08.068.

Su, X., Ghersi, F., Teng, F., Le Treut, G. & Liang, M. (2022): The economic impact of a deep decarbon-isation pathway for China: a hybrid model analysis through bottom-up and top-down linking. Mitig Adapt Strat Glob Change 27 (1). DOI: 10.1007/s11027-021-09979-w.

Thissen, M., Lankhuizen, M., van Oort, F., Los, B. & Diodato, D. (2018): EUREGIO: The construction of a global IO DATABASE with regional detail for Europe for 2000-2010. Tinbergen Institute Discussion Papers. https://ideas.repec.org/p/tin/wpaper/20180084.html.

Többen, J. (2017): Regional Net Impacts and Social Distribution Effects of Promoting Renewable Energies in Germany. Ecological Economics 135, pp. 195–208.

Többen, J., Pichler, P.-P., Jaccard, I. S., Kratena, K., Moran, D., Zheng, H. & Weisz, H. (2023): Unequal carbon tax impacts on 38 million German households: assessing spatial and socio-economic hotspots. Environ. Res.: Climate. DOI: 10.1088/2752-5295/aceea0.

Topolewski, Ł. (2021): Relationship between Energy Consumption and Economic Growth in European Countries: Evidence from Dynamic Panel Data Analysis. Energies 14 (12), p. 3565. DOI: 10.3390/en14123565.

Ulrich, P. (2022): Gesamtwirtschaftliche Effekte der Energiewende in den Bundesländern – Struktur, Dynamik und räumliche Verteilung. Informationen zur Raumentwicklung 1/2022.

Ulrich, P., Lehr, U. & Lutz, C. (2018): Gesamtwirtschaftliche Effekte der Energiewende in den Bundesländern – Methodische Ansätze und Ergebnisse. GWS Research Report 2018/05, Osnabrück. http://papers.gws-os.com/gws-researchreport18-5.pdf.

Ulrich, P., Naegler, T., Becker, L., Lehr, U., Simon, S., Sutardhio, C. & Weidlich, A. (2022): Comparison of macroeconomic developments in ten scenarios of energy system transformation in Germany: national and regional results. Energy, Sustainability and Society 12, 35. DOI: 10.1186/s13705-022-00361-5.

Vrontisi, Z., Fragkiadakis, K., Kannavou, M. & Capros, P. (2020): Energy system transition and macro-economic impacts of a European decarbonization action towards a below 2 °C climate stabilization. Climatic Change 162, pp. 1857–1875. DOI: 10.1007/s10584-019-02440-7.

Wiebe, K. S., Bjelle, E. L., Többen, J. & Wood, R. (2018): Implementing exogenous scenarios in a global MRIO model for the estimation of future environmental footprints. Journal of economic structures 7 (1). DOI: 10.1186/s40008-018-0118-y.