European green transition: problems and solutions

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Most countries are presently both combating to recover after the global pandemic and facing numerous challenges to economy coped with deepening impact of climate change. Progress towards reaching SDGs (sustainable development goals) has been slower than required to achieve the timeline laid out in 2015; the year 2023 marks the halfway point to 2030. Business leaders, policy-makers, international and civil society organizations, innovators and social entrepreneurs are trying to find a workable solution to green transition. 

European and global economic review
Usually, the GDP per inhabitant can be used to compare economic output of different countries; thus, the GDP per inhabitant in the EU fell from €31,3 thousand in 2019 to €29,9 in 2020, before rebounding to about €32, 3 in 2021.
In the EU-wide, the cost of living varies from state to state, including price level differences by using an artificial measurement “currency unit” as a purchasing power standard, PPS. Using this measure, the highest value of “relative living standards of individual EU states” was recorded in Luxembourg, where GDP per inhabitant in PPS was almost 2.8 times as high as the EU average. By contrast, GDP per inhabitant in Bulgaria was just over half (55 %) the EU average.
To compare, the US per capita, in the US dollars is presently at about 63 thousand, compared to about 35 thousand in the EU. The total GDP value in the US is about $20-26 trillion, compared to $15-19 trillion in China and $15-17 trillion in the EU (the figures are rounded due to different type of calculations).

Eurostat Report -key figures:

Membership in the EU as a growth factor: aside from the most populous members having bigger economies, another pattern emerges, with the time the country has spent in the EU. Five of the six founders of the EU (Germany, France, Italy, the Netherlands and Belgium) are among top 10 biggest economies of the EU.
Ireland and Denmark, the next entrants into the union (in1973) are ranked 9th and 11th respectively; the bottom 10 countries all joined the EU post-2004. The UK—which joined the bloc in 1973 and formally left in 2020—would have been the second-largest economy in the region at $3.4 trillion.

Sectoral economy in the EU
The EU has four primary sectors of economic output: services, industry, construction, and agriculture (including fishing and forestry.) Below is an analysis of some of these sectors and the countries which contribute the most to it; all figures are from Eurostat assessment.
= Services and tourism: the EU economy relies heavily on the services sector, accounting for more than 70% of the value added to the economy in 2020. It also is the sector with the highest share of employment in the EU, at 73%.
= Industry: meanwhile 20% of the EU’s gross domestic product came from industry, with Ireland’s economy having the most share, about 40% in its GDP. Czechia, Slovenia and Poland also had a significant share of industry output. Mining coal and lignite in the EU saw a brief rebound in output in 2021, though levels continued to be subdued.
Generally, sectoral share of the EU’s economy looks the following way: 1. Services-72.4%, 2. Industry- 20.1%, 3. Construction- 5.6%, 4. Agriculture, forestry and fishing- 1.8%.
In Luxembourg, which has a large financial services sector, 87% of the country’s gross domestic product came from the services sector.
= Agriculture: less than 2% of the EU’s economy relies on agriculture, forestry and fishing. Romania, Latvia and Greece contribute most to this sector, however the share in total output in each country is less than 5%. Bulgaria has the highest employment (16%) in this sector compared to other EU members.
= Energy: the EU imports nearly 60% of its energy requirements. Until the end of 2021, Russia was the biggest exporter of petroleum and natural gas to the region. After the war in Ukraine, the share has steadily decreased from nearly 25% to 15% for petroleum liquids and from nearly 40% to 15% for natural gas. In 2020, some 22.1 % of the EU’s gross final energy consumption was from renewable energy sources, compared with 14.4 % a decade earlier. In 2020, more than three fifths (60.1 %) of the final energy consumption in Sweden was from renewable sources, while shares of more than one third were also recorded in Finland, Latvia, Austria and Portugal. By contrast, the lowest shares of renewable energy sources in final energy consumption – less than 15.0 % – were recorded in the Netherlands, Hungary, Belgium and Luxembourg, with a low level of 10.7 % in Malta.
= Tourism economies like Malta and Cyprus also had an above 80% share of services in their GDP. In summer 2021, there was a rebound in tourist activity across much of the EU. In absolute terms, the highest increases in nights spent by domestic tourists were recorded in Spain (up 41.4 million nights compared with summer 2020), while there was rapid growth in the number of nights spent by international tourists in Spain (up 44.7 million nights), Italy (up 36.9 million nights) and Greece (up 26.7 million nights).
= Transport: in 2019, there were 242 million passenger cars on the EU’s roads, equivalent to 541 cars per 1 000 inhabitants or slightly more than one car for each two persons. Car ownership rates were highest in Luxembourg (681 per 1 000 inhabitants) followed by Italy, Cyprus, Finland and Poland (all above 600 per 1 000 inhabitants). There were less than 400 cars per 1 000 inhabitants in Hungary (390), Latvia (381) and Romania (357). Newer cars tend to be less environmentally-damaging, with lower fuel consumption and lower emissions, although these benefits may be offset to some extent if there is a trend towards larger or more powerful vehicles; there is also a growing share of electric/hybrid vehicles in the EU. In 2019, more than half (52.2 %) of all passenger cars in the EU were estimated to be at least 10 years old, compared with just 11.8 % that were less than two years.
Generally, EU’s trade surplus is presently at about €62 billion, with over half of it -61 percent- is “produced” in intra-EU trade (according to the mentioned Eurostat report, p. 42).

Business in the EU
During last twenty years (2000- 2020), the share of EU total value added that was generated within the services sector rose from 69.2 % to 73.1 %, mainly due to increases in the output of professional, scientific and technical activities. By contrast, the relative share of some other parts of the EU economy contracted during two decades in 21st century: the industrial’s share went down from 22.6 % to 19.5 %, while the share of agriculture, forestry and fishing fell from 2.5 % to 1.8 %, and that of construction from 5.7 % to 5.5 %.
The share of services within the EU’s total value added in 2021 was about 72.4 %; while most activities in the business economy rebounded strongly in 2021, the pandemic has had a devastating impact on production and several service activities.

= Micro, small and medium-sized enterprises with less than 250 persons employed (often referred to as the backbone of the European economy) are providing jobs and growth opportunities for an overwhelming majority (93.0 %) of enterprises in the EU’s non-financial business economy; the SMEs, with less than 10 persons employed are classified as micro enterprises.
By contrast, just 0.2 % of all enterprises in the EU have had 250 or more persons employed and were classified as large enterprises. The economic weight of large enterprises in the EU was considerably greater in employment and value added terms, as they provided work to more than one third (35.6 %) of the EU’s non-financial business economy workforce and contributed close to half (47.6 %) of its value added. By 2020, there were about 23 million SMEs (with less than 250 persons employed) in the EU’s non-financial business economy. Together, these SMEs employed about 85 million people and contributed €3 587 billion of value added. The economic contribution made by SMEs was particularly notable in Cyprus (in 2018), Malta and Estonia, where SMEs provided more than 75.0 % of the value added in the non-financial business economy.
Contribution of micro enterprises (employing fewer than 10 persons) was particularly high: by contrast, large enterprises (with 250 or more persons employed) accounted for more than three fifths (63.5 %) of the value added in the Irish non-financial business economy and more than half of the value added in France, Germany and Sweden. Totally, in over 12 EU states, the share of SMEs in national economy was more that 60 percent.

Research and development
Science, research and innovation (SRI) are central to providing the scientific and technical solutions needed to meet global societal challenges such as climate change, digitalisation and/or environmental quality. EU-wide gross domestic expenditure on SRIs was €311 billion in 2020, The SRIs is often expressed relative to GDP, an indicator that is known as the SRI’s intensity, which rose above 2.00 % for the first time in 2011 (2.02 %) and continued to grow at a modest (and almost interrupted) pace presently to over 2,5% presently.
The highest SRI-intensity among the EU states, i.e. over three percent was 3.53 % in Sweden, with Belgium (3.48 %) and Austria – 3.20 %.

Employment in the “green/environmental” economy
The environmental economy includes activities that relate to environmental protection and the management of natural resources. Overall, there were 4.5 million people working in the EU’s environmental economy in 2019, which marked an increase of 43.3 % when compared with the situation in 2000. In 2019, the management of energy resources had the largest workforce within the EU’s environmental economy (1.7 million), followed by waste management (1.2 million) and other environmental protection spheres (0.9 million).
The size of the EU workforce for the management of energy resources was 3.0 times as large in 2019 as it had been in 2000; this was by far the most rapid expansion among the different subsectors of the environmental economy. By contrast, there was a decrease in the number of persons employed for wastewater management.
Environmental taxes can be used to try to influence the behavior of economic operators, both producers and consumers. In 2020, EU environmental tax revenues were valued at €300 billion, equivalent to 2.2 % of GDP. This ratio peaked at 3.8 % in Greece, while it was 3.3 % Croatia and 3.2 % in Denmark and the Netherlands. By contrast, environmental tax revenues accounted for less than 2.0 % of GDP in Czechia, Lithuania, Romania, Spain, Germany, Luxembourg and Ireland.

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