Unveiling the enablers: Exploring country characteristics that encourage emissions reduction

Abstract

The transition to sustainability relies on adopting green technology and fostering innovation. While emissions abatement is achieved at the firm level, our study argues that national characteristics significantly shape the decarbonization process. Utilizing the EU Emissions Trading System (ETS) we delve into the relation between national structural and institutional characteristics and the effectiveness of the EU environmental policies. Leveraging firm-level emissions data and structural indicators from IMD and WEF, our analysis spans 540 firms from 2005 to 2018. Our empirical findings underscore several critical imperatives. Firstly, we highlight the pressing need to bridge the skills gap through targeted investments in educational and training initiatives tailored for both traditional workers and managerial personnel. Secondly, we advocate for prioritizing investments in technologies and infrastructure aimed at reducing emissions. Thirdly, we stress the importance of fostering collaboration among stakeholders across various sectors-public, private, educational, and research-to leverage collective expertise towards sustainable outcomes. Lastly, we emphasize the establishment of robust monitoring and evaluation mechanisms to assess the effectiveness of emission reduction measures and identify areas for improvement. Overall, our findings accentuate the catalytic role of strong institutions in empowering firms to drive environmental progress.

Keywords: Emissions, Climate change, Technological innovation, Skills, Institutions, Technological infrastructure, EU ETS