15. September 2022Novel research to identify EU regions vulnerable to low-carbon transition

Europe has committed to turning climate neutral by 2050. This commitment is articulated in the European Green Deal (European Commission, 2019), which coordinates policies and channels investments in sectors that will deliver the socio-economic transformation needed to reach climate neutrality. Cutting-edge environmentally friendly technologies and innovation, massive roll-out of fossil-free transport, decarbonisation of the power sector and the retrofitting of buildings are priority sectors. Acknowledging, however, that the shift away from fossil fuels will not benefit equally all areas and sectors, the European Commission puts forward policies and financing mechanisms to ensure the transition happens in a just and socially fair way.

Which are the EU regions most at risk from the energy transition?

Regions with economies that are highly dependent on fossil fuels are expected to carry a disproportionate share of the burdens of the energy transition. It is therefore crucial to devise policies that are effective in alleviating this excess burden from affected areas. A first step to this direction is to identify the regions at risk. The “Report on current socioeconomic, demographic, energy, and socio-political challenges in carbon intensive regions” prepared in the framework of CINTRAN project develops a socio-economic risk indicator and identifies the 15 EU regions likely to be affected the most from the transition. The indicator rests on the latest definition of the IPCC, which treats risk as the combination of Hazard, Exposure and Vulnerability.

 

The energy and socio-economic profile of EU regions at risk

The analysis delivers an outlook of the economic characteristics of each region at risk, including key macroeconomic indicators, employment rates by age and a sectoral decomposition in terms of Gross Value Added. Then, the analysis brings attention to the energy-related and socio-economic impacts of the transition, focusing on fossil fuel-related sectors and fossil fuel-based power generation, macro-economic growth and employment; and migration.

A very interesting finding is that the majority of the identified vulnerable regions are already lagging behind national average in terms of key macroeconomic indicators. The annual growth rate of regional GDP across the concerned regions is lower than that of national GDP in the period in 2010-2020, which indicates that fossil-based activities may result in growth lags. Moreover, in these regions for the same period GDP/capita does not exceed 20,000 EUR, which is significantly lower than the EU average (~30,000 EUR), while for certain regions unemployment soars among the highest EU levels.

This means that the concerned regions are exposed even more to the risks resulting from the energy transition. It is worth exploring further how such growth lag may diminish the regions’ adaptive capacity and exacerbate their vulnerability towards the challenges posed by the transition.

Still today, and even more so as a response to the current energy crisis, production of hard coal and lignite, oil and gas extraction, coke manufacture and refineries remain high in these vulnerable energy intensive regions despite some level of coal phase out and decarbonization. The deployment of renewable energy sources (RES) is limited except for a few regions where dedicated (national) policies favouring the uptake of variable RES are introduced.

Migrating away from EU regions at risk: key trends

Outward migration plays an important role in regions’ capacity to cope with the energy transition. Outward migration can substantially alter the structure of the local population and negatively affect a region’s social demography, but also limit its skill base to revive the economy, especially when the young and most educated segments are the ones migrating. In addition, outward migration may weaken the competitiveness of the local economy by reducing demand for goods and services. This means that for the highly educated, the carbon intensive regions we analysed are relatively unattractive. It also means that the low level of their GDP is associated with higher net-emigration from these regions. These findings point towards a general unattractiveness of carbon intensive regions, particularly in Central and Eastern Europe, which are the ones challenged by net-migration outflows. The geographic concentration of fossil-fuel dependent regions facing net migration is something worth researching further in my opinion.

How should these insights be reflected into EU policies?

EU regions considered to be more at risk from the transition to a fossil free economy need tailored support to cope with the transformation of their energy systems, mitigate the negative socio-economic implications of this transformation and pro-actively create alternative pathways of economic development. Designing effective policies, i.e., policies that tackle the specific challenges facing energy intensive regions, is key.

Considering that the economic and social effects of the green transition on the EU regions will be asymmetric, some form of wealth transfers will be required towards the most affected territories. More importantly, policies that create enabling conditions to attract sustainable economic activities are key. These may include infrastructure and human capital development. Compensating and supporting mechanisms need to be put in place to minimize serious economic impacts and aggravated social inequalities.

A proactive approach would be to “pay-now” by investing in job training, education, and infrastructure in the concerned regions. This could take the form of funding projects that help diversify the local economy and are led by local stakeholders, projects that support workforce development, education, or physical infrastructure as a means to enhancing the adaptive capacity of these regions.

The Just Transition Fund (JTF) set up by the European Commission is already working towards that direction aiming to alleviate the socio-economic costs triggered by the energy transition by supporting the economic diversification and reconversion of the territories concerned.

A finding worth noting is that with few exceptions the regions identified in this analysis coincide with the regions eligible for JTF allocation. Regions in Germany, which ranks second in JTF allocations amongst the EU 27, have not been identified as regions at risk. This is due to their low sensitivity and high adaptive capacity, two sub-indicators that are considered by the Socioeconomic risk indicator.

 

Further information:

The full report on the Socioeconomic Risk Index will be published later in 2022 on coaltransitions.org.

 

 

© The blog text is licenced under CC BY. Figures are excluded from this license.

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Authors

Zoi Vrontisi
Director, Economic Impact Assessments | Senior energy and climate expert
E3-Modelling

Ioannis Charalampidis
Economist
E3-Modelling

Alkistis Florou
Policy Analyst
E3-Modelling

 

Editor

Christof Arens
Senior Researcher | Wuppertal Institute for Climate, Environment and Energy
Energy, Transport, and Climate Policy Division

 

The CINTRAN project has received funding from the European Union’s Horizon 2020 research and innovation programme under grant agreement No. 884539. The sole responsibility for the content of this website lies with the authors and does not necessarily reflect the opinion of CINEA or other EU agencies or bodies.