Regional drivers of industrial decarbonisation: a spatial econometric analysis of 238 EU regions between 2008 and 2020

Why do some regions in Europe lead the way in reducing industrial carbon emissions, while others lag behind? This question is at the heart of this new study that examines the regional factors influencing industrial decarbonisation across Europe. As the EU pushes forward with its ambitious climate goals, understanding these regional dynamics is essential for crafting effective policies and achieving carbon neutrality.

The challenge of industrial emissions

Industrial carbon emissions are a significant contributor to climate change, making the decarbonisation of industries a critical focus for the EU. Despite being a global leader in climate policies, the EU still faces the challenge of achieving substantial emission reductions, especially in hard-to-abate sectors like heavy manufacturing and energy production. These industries are deeply intertwined with their local economies, making it crucial to look beyond national borders and understand the regional factors at play.

The role of geographical space and regional determinants in industrial decarbonisation

Traditional studies often examine carbon emissions at the national level, overlooking the crucial role of regional dynamics. Regions within a country can have vastly different economic activities, policies, and technological capabilities, leading to significant variations in carbon emissions. By focusing on regions, this study captures a more nuanced picture of how local socio-economic factors influence carbon emissions. Such an analysis also weighs a second aspect that is often neglected by econometric studies: the existence of spatial dependency among carbon emissions trajectories. The spatial connectivity of locations is likely crucial for carbon emissions, as spatial spillovers can occur due to the underlying integration of economies. Therefore, this study employs spatial econometric models that account for geographical interconnections to a novel panel dataset comprising 13 years (2008–2020) of carbon emissions from hard-to-abate industrial sectors in 238 NUTS-2 regions from 27 EU countries.

The spatial effect of carbon emissions

One of the most compelling insights from this research is the validation of endogenous spatial interactions between industrial carbon emissions in EU regions. This suggests that the interconnected economies within the EU create a spillover effect, where emissions in one region are affected by the activities and emissions of nearby regions. Additionally, this spatial dependence might reflect competitive or mimetic behaviors, leading neighboring regions to develop similar industrial and environmental patterns.

Economic growth: a double-edged sword

Another key finding is the relationship between economic growth and carbon emissions, which follows the so-called Environmental Kuznets Curve. In simpler terms, as regions grow economically, their emissions initially increase due to higher industrial activity and consumption. However, once a region reaches a certain level of wealth (i.e. tipping point), emissions start to decline, due to investments in cleaner technologies and implementation of more sustainable practices.

The role of education and innovation

Another significant finding of the study is the impact of education and research and development (R&D) on reducing carbon emissions. Regions with higher education levels are more likely to adopt cleaner industrial practices and technologies. Educated populations tend to be more aware of environmental issues, pushing for greener policies and practices. Similarly, investment in R&D drives innovation, leading to the development of new technologies that can significantly reduce industrial emissions. These regions not only benefit directly from their innovations but also positively influence their neighbors, creating a spillover effect of decarbonisation.

Shifting towards a service economy

The study also highlights the benefits of transitioning from manufacturing to service-based economies. Regions specializing in services—such as finance, healthcare, and education—tend to have lower carbon emissions than those dominated by heavy industry. The service sector typically requires less energy and produces fewer emissions, making it a key player in the EU’s decarbonisation strategy. Encouraging the growth of service industries can be an effective way to reduce overall carbon emissions and support sustainable regional development.

Towards a carbon-neutral future

As the EU aims to become the first carbon-neutral continent by 2050, understanding the regional drivers of industrial decarbonisation becomes increasingly important. This study provides valuable insights into how regions can contribute to this ambitious goal. By focusing on education, innovation, and the growth of the service sector, regions can play a pivotal role in reducing carbon emissions. Moreover, the study underscores the need for coordinated efforts across regions to amplify the impact of decarbonisation policies, and points out several areas for further research, such as broadening sector focus, incorporating additional variables, and examining localized and international trade impacts.

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Authors at the Department of Management

CHIARA VAGNINI – Ph.D. student

Academic disciplines: Management Engineering

Teaching areas: Business Administration

Research fields: Behavioral operations, industrial decarbonisation.

Chiara Vagnini is a Ph.D. student in General Management at the Department of Management of the University of Bologna. Her research explores the influence of decision biases and heuristics on sustainable sourcing and examines the factors driving industrial sustainability transitions, with a particular focus on decarbonization pathways across EU regions.

LETICIA CANAL VIEIRA – Assistant Professor

Academic disciplines: Management Engineering

Teaching areas: Sustainability Transition Management

Research fields:  Decarbonisation strategies, sustainability measurement, and disclosure.

Leticia Canal Vieira is an Assistant Professor in the Department of Management at the University of Bologna. Her research interest lies in how manufacturing industries address the low-carbon transition and climate change action and how instruments like decarbonisation strategies and sustainability reports can create organisational change.

MARIOLINA LONGO – Associate Professor

Academic disciplines: Management Engineering

Teaching areas: Business Administration

Research fields: Sustainability measurement, industrial transition.

Mariolina Longo is an Associate Professor in the Department of Management at the University of Bologna. Her research focuses mainly on the topics of Performance Measurement of Corporate Sustainability and Industrial Transition. She has been responsible for national and international research projects.

MATTEO MURA – Associate Professor

Academic disciplines: Management Engineering

Teaching areas: Management Control Systems

Research fields: Design and implementation of business performance measurement and management systems.

Matteo Mura, PhD, is an Associate Professor in the Department of Management at the University of Bologna and Director of the Centre for Sustainability and Climate Change at Bologna Business School. He is a Visiting Fellow at the Centre for Business Performance at the Cranfield School of Management.