Impacts of the European energy transition: Spillover effects and transmission channels

Abstract

We analyze the impacts of the European energy transition on the energy transitions of major industrialized economies (China and U.S.) and on carbon emissions through two potential transmission channels: FDI and immigration. Our sample consists of 16 European economies, the U.S., and China from 2005 to 2019. We use the GVAR to capture spillover effects and transmission channels of energy transition shocks. We find that the European energy transition i) promotes the U.S. energy transition, ii) reduces carbon emissions in the U.S. and Europe, and iii) hinders the Chinese energy transition and carbon emissions. Our results suggest that one-quarter of the European energy transition depends on the external environment. Finally, our study opens windows for globally efficient international cooperation to internalize international externalities and recommends that empirical studies should model carbon emissions and energy transitions as global externalities.