Green Transitioin and Nominal Convergence in the EU

Abstract

Real convergence performance in the EU was strong before the global financial crisis but the period following the crisis saw distinctly weakened catching-up processes. One of the major long-term factors for the convergence process in the EU is the Green Transition since it is expected to transform the entire economy. While some EU member-states advanced in catching-up to the green targets before the adoption of the Green Pact, some others’ weaker starting point would lead to deeper restructuring of their economies. The aim of this study is to evaluate the dynamics of real convergence and green convergence before the start of the Green pact and on that ground to assess their relationship. If the tendencies from the past decade persist in the period till 2030 we could expect slow real convergence as well as green convergence. The growth and convergence of GDP per capita in the past were associated with slow convergence of the use of renewable energy sources and greenhouse emissions while the relation with energy efficiency was weak. We argue that while green transition envisages radical measures for reaching common green targets (full convergence), there is no target neither measures for real convergence. This could lead to further weak real convergence or divergence.

Keywords: nominal convergence, green transition, EU economy, climate change

JEL Classification: E01, F02, O44