Regional coordination of European environmental policies

The first part of our paper is devoted to a critical review of the main international agreements to reduce climate change and their implementation in the EU environmental policy. The EU has undoubtedly made a big effort in developing a progressive environmental policy, but many of its own policies are still far from making a difference to climate change. The current policy action toward “green” Europe is the so-called 20-20-20 climate and energy package; to meet its targets, governments in EU countries use a large variety of support instruments (Dinica, 2006). The second part of our paper evaluates the mechanisms implemented in different EU countries to promote the use of renewable energy sources. Then, we move to the aim of our paper, that is the analysis of the problem of coordination among policy makers that undermine the achievement of the 20-20-20 targets, using a game-theoretic framework (Böhringer et al., 2009). We analyze the puzzle concerning the relative advantage of quantity-driven approach (such as a cap-and-trade system embodied in the Kyoto Protocol) and a price-driven approach (such as a carbon tax system). However, EU countries have the incentive to free-ride, or to impose as few costs as possible on their home economy while enjoying the benefits created at the other countries’ cost (Barrett, 1994). So, we assess the formidable problems of opportunistic behavior and inefficient outcomes. We start our analysis by studying global trends in the causes and level of emissions with particular reference to population growth and energy demand. Then, we analyze the EU incentive mechanisms to allow EU member States to fulfill the package targets: the strategies planned by governments imply different costs that might be prohibitive if other countries are not making comparable efforts. Third, we move to the last part of our research, that is to study opportunistic behavior among EU regions in reaching the 20-20-20 targets. Our starting point is a research made by Nordhaus (2009) who analyzes, at global level, the impact of non participation on the costs of slowing global warming. In particular, he assesses the economic impact that arises when some countries do not take part in the agreement to mitigate climate change through a functional form for the cost function that allows to estimate the costs of nonparticipation. We do a similar analysis, but we get inside the European context that is EU’s 27 Member States (EU27), in order to estimate the cost of nonparticipation. We divide the EU in two groups, the old and the new member States (EU 15 and EU 12). Such division reflects both the contribution to CO2 emissions and the economic trend that is very low for EU12 countries compared to the old member States. Our study has examined the economic impact that occurs when some EU countries do not partecipate in the 20-20-20 Climate and Energy Package. From our calculations, it is quite straightforward that limiting participation produce inefficiencies by rising the costs for the participating countries. In particular, we find out that there are reductions of polluting emissions at relatively low cost, but the marginal costs of additional reductions rise strongly as the reduction rate rises (this is due the convexity of the cost function). To conclude, we evaluate the variation of costs to be borne by EU countries according to the participation.