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Green energy transition and the importance of cross-border coordination

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  • Fatouros, Nikos
  • Kasioumi, Myrto

Abstract

Economists and policymakers have deemed the green energy transition as one of the most effective tools for tackling climate change. Generally, strategic interactions across countries play a significant role in the effectiveness of environmental policies. This paper emphasizes the critical role of cross-border coordination. Our analysis builds upon a standard macroeconomic model of energy policy choices to incorporate emission externalities from neighboring countries and examine how these countries’ actions influence domestic decisions regarding the green transition. Our findings suggest that countries transition slowly because foreign emissions reduce the perceived benefits of domestic decarbonization. Thus, countries remain trapped in a Prisoner’s Dilemma, while international cooperation is a key mechanism for achieving the socially optimal outcome.

Suggested Citation

  • Fatouros, Nikos & Kasioumi, Myrto, 2026. "Green energy transition and the importance of cross-border coordination," The Journal of Economic Asymmetries, Elsevier, vol. 33(C).
    • Handle: RePEc:eee:joecas:v:33:y:2026:i:c:s1703494926000058
    DOI: 10.1016/j.jeca.2026.e00453
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    JEL classification:

    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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