European Planning Studies

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How the European Union reaches the target of CO2

emissions under the Paris Agreement

Xiangyu Teng, Liang Chun Lu & Yung-Ho Chiu

To cite this article: Xiangyu Teng, Liang Chun Lu & Yung-Ho Chiu (2019): How the European
Union reaches the target of CO2 emissions under the Paris Agreement, European Planning
Studies, DOI: 10.1080/09654313.2019.1696283

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EUROPEAN PLANNING STUDIES
https://doi.org/10.1080/09654313.2019.1696283

How the European Union reaches the target of CO2 emissions

under the Paris Agreement
Xiangyu Tenga,b, Liang Chun Lub and Yung-Ho Chiu b

a
School of Economic Management, Changzhou Vocational Institute of Mechatronic Technology, Changzhou,
People’s Republic of China; bDepartment of Economics, Soochow University, Taipei, Taiwan

ABSTRACT ARTICLE HISTORY

In the future promotion of Paris Agreement, the European Union Received 16 April 2019
(EU) has become an object of concern in the world through its Revised 25 October 2019
own performance at improving energy efficiency and reducing Accepted 18 November 2019
CO2 emissions. This research collects data from 28 EU countries
KEYWORDS
and Norway from 2010 to 2015 to evaluate their energy and CO2 Energy and CO2 emissions
emission efficiency through a meta-frontier non-radial directional efficiency; technical efficiency
distance function. Different from previous studies, only gap; performance
considering the individually countries efficiency comparison, this improvement; meta-frontier
research divides the sample countries into two groups, the group non-radial directional
of North-Western European countries and the group of Central- distance function; Paris
Eastern European countries. The empirical results show that there Agreement
is a declining trend in the efficiency value of Central-Eastern
European countries from 2010 (0.832) to 2015 (0.792), and a
significant average technology gap ratio at 0.904. We then
compare energy and CO2 emissions’ room for improvements for
specific countries and conclude that the Central-Eastern European
countries should learn from the management experience of the
North-Western European countries. It is an effective way to
improve the energy and CO2 emission performances of EU
countries by restricting the transfer of high carbon emissions
industries and encouraging the long-term sustainable
development of renewable energy.

1. Introduction
With the issue of global warming being raised for half a century, Europe has always been at
the forefront of the world in terms of the global greenhouse effect. The European Union
Commission in 2011 put forward its Energy Road map 2050, which means that by 2050,
the EU countries will target CO2 emissions to drop by 80%–95% compared to 1990 levels.
In 2014, the European Council agree on a new 2030 Framework for climate and energy
that put forward a concrete and implementable plan to reduce 40% greenhouse gas emissions
compared to 1990s levels by 2030. In November 2018, the European Commission presented
a long-term strategic mission to reduce greenhouse gas (GHG) emissions, showing how
Europe can lead the way to climate neutrality – an economy with net-zero GHG emissions.

CONTACT Yung-Ho Chiu echiu@scu.edu.tw Department of Economics, Soochow University, 56, Kueiyang St., Sec.
1, Taipei 10048, Taiwan
© 2019 Informa UK Limited, trading as Taylor & Francis Group
2 X. TENG ET AL.

The Paris Agreement adopted by the UNFCCC in December 2015 at the Climate
Change Conference in Paris by nearly 195 UN member states led to the start of a mid-
long-term global response to climate change mitigation and adaptation. The Paris Agree-
ment has received widespread consensus among all countries in the world and is the most
legally binding agreement in history that was reached through peaceful negotiation. Paris
agreement encourages countries to strengthen the global response to the threat of climate
change by keeping a global temperature rise this century well below 2 degree Celsius and to
pursue efforts to limit the temperature increase even further to 1.5 degree Celsius. All
countries shall pledge to peak its greenhouse gas emissions, and in the second half of
this century, they will strive to achieve zero net emissions of greenhouse gases. Zahar
(2017) believed that there is a bottom-up compliance mechanism in the Paris Agreement
that legally determines the governance method by using national independent contri-
butions instead of the overall emission reduction targets. It is therefore highly inclusive.
Countries can make decisions based on their own national conditions in response to
climate change and improve energy and CO2 emission performances.
The EU played a leading role in the adoption of the Paris Agreement and looks to take a
leading role in other countries in the world in the implementation and promotion of the
Paris Agreement in the future. Therefore, the improvement of EU’s energy and CO2 emis-
sion performance has attracted worldwide attention. At the same time, as Oberthür and
Groen (2018) pointed out that, in order to achieve a high level of the EU’s goal achieve-
ment from the Paris Agreement, the EU needs an effective strategy and needs to quickly
strengthen the promotion and implementation of countermeasures. This study takes 28
EU and Norway as the decision making units (DMUs) and collects their data for 2010–
2015. Through the research methods of the meta-frontier non-radial directional distance
function, we try to analyze the performance of the EU’s energy efficiency and CO2 emis-
sions efficiency.
The method of meta-frontier non-radial directional distance function is one model
type of data envelopment analysis (DEA). As for the DEA techniques, a great
number of studies apply DEA by the radial models, like CCR model by Charnes,
Cooper, and Rhodes (1978), BCC model by Banker, Charnes, and Cooper (1984). But
these models also ignore that most DMUs in business always want to maximize their
profit. Chambers, Fāure, and Grosskopf (1996) introduce a directional distance function
which is a generalization of Shephard’s input and output distance function. It can esti-
mate the efficiency scores by incorporating all types of inputs and outputs. Färe and
Grosskopf (2004) pointed that the directional distance function can be applied in an
estimation of industrial inefficiency under the assumption that the resources can be
efficiently allocated. Whereas the directional technology distance function could be
easily affected by the slack in the technological constraints. However, the directional
technology distance function is susceptible to the problem of slack in the technological
constraints. Färe and Grossopf (2010) and Zhang and Choi (2014) argued the direc-
tional distance function has the potential to reduce inefficiencies and thus may overes-
timate the efficiency score. To overcome the defect of radial model, Färe and Grossopf
(2010) set up a SBM (slacks-based measure) of efficiency based on directional distance
functions, called non-radial directional distance function. Since the non-radial DDF
allows for a more flexible calculation of slacks, it has a discrimination power to identify
slacks of energy, CO2 emissions, and GDP. Compared with other methods, non-radial
 EUROPEAN PLANNING STUDIES 3

DDF is better, because it provides more reasonable and accurate estimation results, thus
it has been widely used by recent research on energy and environmental fields. In
addition, with the development of DEA method, a meta-frontier model has been pro-
posed which provides a possibility of comparing the performance of DMUs which
belong to different economy, geography, market, and other factors.
The earliest applications of DEA in the energy and environmental fields can be traced
back to Färe, Grosskopf, and Tyteca (1996), who used data from U.S. fossil-fuel-fired
electric utilities and introduced an environmental performance indicator based on the
decomposition of overall factor productivity into a pollution index and an input-
output efficiency index. The use of European data in recent years has made it very
common for scholars to carry out relevant analyses in the energy and environmental
fields. For instance, Blokhuis, Advokaat, and Schaefer (2012) applied DEA for a com-
parison of performances of existing Local Energy Companies (LECs) under the three
perspectives including of organization, finance and technology, taking data from 62
LECs in the Netherlands. Keirstead (2013) employed DEA to measure urban energy
efficiency in UK cities. Salazar-Ordóñez, Pérez-Hernández, and Martín-Lozano (2013)
used DEA on the efficiency of farms’ NOx emissions and CO2 emissions in three
Spanish regions. Zografidou, Petridis, Arabatzis, and Dey (2015) used DEA for an
optimal design of network renewable energy production, based on data from 13
plants in Greece.
References for DEA analysis using countries or regions as DMUs usually take labour,
capital, and energy consumption as input items, GDP as a desirable output item, and
CO2 as an undesirable output item to set effective production frontiers. Bampatsou,
Papadopoulos, and Zervas (2013) used DEA to determine the technical efficiency
index of the EU-15 countries from 1980 to 2008 and pointed out a negative affects to
efficiency by inputting nuclear energy, but this can be improved by a decrease in
fossil fuels and better exploitation of renewable energy sources. Chang(2014) utilized
data of EU-27 countries to investigate their energy use efficiency, established an indi-
cator for the room for improvement in terms of energy intensity, and found that
improvement in energy intensity does not fully depend on a decline in energy intensity,
but rather room for improvement needs to be seen in terms of energy intensity
decreases. Gómez-Calvet, Conesa, Gómez-Calvet, and Tortosa-Ausina (2015) applied
dynamic DEA for an evaluation of environmental performance evolution in the EU-
28 in order to find a continuous process between 1993 and 2010 and proposed that
eco-efficiency improvement may not just help to provide sustainable supplies of
natural resources, but may also offer significant social benefits. Robaina-Alves, Mou-
tinho, and Macedo (2015) used DEA for assessing the environment and resource
efficiency problem in 26 European countries and indicated that Ireland, Hungary, Slo-
vakia and Portugal are the most efficient, while Italy, Denmark, Bulgaria and Romania
are the least efficient.
There are also some studies in the literature that use DEA to compare energy and
emissions efficiency at the international or interregional level. The most common
articles comparing OECD countries are Zaim and Taskin (2000), Färe, Grosskopf,
and Hernandez-Sancho (2004), Zhou and Ang (2008), Camarero, Castillo, Picazo-
Tadeo, and Tamarit (2013), Apergis, Aye, Barros, Gupta, and Wanke (2015), and
Guo, Lu, Lee, and Chiu (2017). Moreover, Ramanathan (2005) studied energy
4 X. TENG ET AL.

consumption and carbon dioxide emissions from 17 countries of the Middle East and
North Africa. Hu and Kao (2007) found the efficient energy-saving targets for the
APEC economies. Song, Zhang, Liu, and Fisher (2013) analyzed the BRICS’ energy
efficiency, while Zhou, Meng, Bai, and Cai (2017) found the energy efficiency and
assessed congestion with an energy mix effect in 19 countries of APEC. Zhang,
Cheng, Yuan, and Gao (2011) used a total-factor framework to investigate the energy
efficiencies of 23 developing countries. As China has now become the world’s top
country in terms of energy consumption and CO2 emissions, it has attracted the atten-
tion of many scholars. Studies that use DEA to compare regional energy and emissions
efficiency in China are Duan, Guo, and Xie (2015), Guo, Wu, Qu, and Yu (2015), Pang,
Deng, and Chiu (2015), and Du, Xie, and Ouyang (2017).
With the DEA research method as a form of comparative analysis for the efficiency of
energy and CO2 emissions, some scholars have found that due to different countries or
regions, there are different national conditions, economic development levels, social
culture, or management systems that impact the results. If we assume that countries or
regions have the same technical level, then errors will easily occur when assessing
efficiency. Therefore, on the basis of traditional DEA, some scholars introduced the
concept of meta-frontier borders, dividing a country or region into several groups, and
evaluated each group-frontier efficiency and mete-frontier efficiency values.
Some studies have divided provinces of China into two groups of eastern and mid-
western regions or the three groups of eastern, central and western regions and used the
meta-frontier method to assess the groups’ differences in energy efficiency and CO2
emission efficiency. For instance, Lin and Du (2013) considered the variation of pro-
duction technologies among regions in China and found that the eastern region not
only has the highest energy efficiency score, but also takes the lead in terms of the tech-
nology gap ratio. Moreover, due to their backward technology levels, the average energy
efficiency scores of the regions in the west of China are particularly low. Wang, Zhao,
Zhou, and Zhou (2013) found that energy efficiency and the technology gap are signifi-
cantly different in the east, central, and west regions, and that the technology gap and
management related to energy utilization are both important sources of energy ineffi-
ciency in the central and west provinces. Du, Lu, and Yu (2014) found that the
sources of potential emission reduction are identified as managerial failure and technol-
ogy gap and suggested that the major contributor to potential emission reduction varies
across different regions, with management inefficiency in the eastern region and a tech-
nology gap in the central and western regions. Yao, Zhou, Zhang, and Li (2015) found
the potential of carbon emission reductions from regional perspectives and suggested
that significant carbon emission reductions can be made via ‘catching up’ for regions
with low energy efficiency and low carbon emission performance. They argued that
the government should restrict mobility of production inputs in the short term and
encourage clean energy in the long term. Li and Lin (2015) indicated that eastern
China has the highest progress inefficiency relative to the meta-frontier, followed by
the western region, and the central region is the worst due to the heavy industrial struc-
tures. They argued that the government should pay more attention to environmental
governance in the central region and try to balance the governance ability and economic
growth of the whole country. Teng, Lu, and Choi (2019) divided 30 Chinese provinces
into key and non-key regions under regional treatment differences and found an
 EUROPEAN PLANNING STUDIES 5

expanded technical gap between the two groups. They argued that increasing emission
treatment expenditures, which can reduce emissions, is an effective method to improve
energy performance. Different from others studies, considering different economic and
environmental factors, the above literatures divide the provinces of China into different
groups, and obtain the group efficiency values and the meta-frontier efficiency values,
and then find the technical efficiency gap radio by comparing the group efficiency
values with the meta-frontier efficiency values. If the group frontier is close to the
meta-frontier, the technical efficiency gap ratio tends to 1, and vice versa, the technical
efficiency gap ratio tends to zero. After comparing the empirical results, it is found that
the technical efficiency gap ratios of the eastern provinces tend to be 1 and those of the
central and western provinces tend to be 0, indicate that there are regional differences
between different groups in China. Some literatures apply the Wilcoxon test to find
these differences with significant results, such as Yao et al. (2015) and Teng et al.
(2019). The above literatures propose a common policy recommendation to improve
overall performance by narrowing regional differences. In other words, it is necessary
for China’s central and western provinces to learn from the management experience
of the eastern provinces, thereby improving their efficiencies.
Different from the previous studies on the EU’s energy efficiency assessment, we refer to
the application of the meta-frontier method from China’s energy performance analyses
mentioned above. This study considers the differences in economic development level
and resource endowments between countries of Europe and divide 28 EU countries and
Norway into the two groups of North-Western Europe and Central-Eastern Europe to
investigate the efficiencies of energy and CO2 emissions. We collected the data for
2010–2015 from the Euro stat database website, using countries’ energy consumption,
labour force and fixed assets as input variables, GDP as the variable of desirable output,
and CO2 emissions as the variable of undesirable output. Through the meta-frontier
non-radial directional distance function to analyze regional energy and CO2 emissions
performances in the North-Western and Central-Eastern regions, we look to offer more
precise, effective policies for specific countries under Paris Agreement based on the
bottom-up approach.
The rest of the paper runs as follows. Section 2 shows the methodology. Section 3 pre-
sents the empirical study. Section 4 offers a discussion. Section 5 ends with the
conclusions.

2. Methodology
In the past two decades, DEA has been wildly applied in energy, environmental, economic,
and productivity analyses. Chung, Färe, and Grosskopf (1997) extended the output dis-
tance function proposed by Shephard (1970) to the directional output distance function
(radial DEA) and followed the Luenberger (1992) model to provide both desirable and
undesirable outputs of the same production basis. By the directional output distance func-
tion, we get both increasing output and decreasing bad output. However, these radial
efficiency models ignore the variances of the variables, which lead to estimation deviations.
Färe and Grossopf (2010) proposed a non-radial directional distance function. Compared
with other methods that can provide more reasonable and accurate estimation results,
scholars began to apply non-radial directional distance functions to energy and
6 X. TENG ET AL.

environmental efficiency analyses, such as Zhou, Ang, and Wang (2012), Chiu, Liou, Wu,
and Fang (2012), Barros, Managi, and Matousek (2012), and Zhang, Zhou, and Choi
(2013).

2.1. Non-radial directional distance functions

Suppose that there is anNdimension DMU set denoted as n, where DMUO represents the
DMU under evaluation and DMUO [ N. The input and output are defined as x [ Rm +,
s
and all production inputs result in production desirable output, Y[ R+ and undesirable
j
output Z [ R+ . Following Färe and Grossopf (2010), Zhou et al. (2012), and Zhang
et al. (2013), we express the non-radial directional distance function as Equation (1).
D(X m , Y s , Z j ; g) = max wxm uxm + wys uys + wzj uzj

N
s.t. ln xmn ≤ xm −uxm gxm , m = 1, . . . , M,
n=1

N
ln ysn ≤ ys −uys gys , s = 1, · · · , S,
n=1

N
ln Z jn ≤ zj −uzj gzj , j = 1, · · · , J,
n=1

uxm , uys , uzj ≥ 0 (1)

In Equation (1), ln is an intensity variable.

y
W=(wxm , ws , wzj ) denotes a weight vector;
g =(( − gx , gy , − gz ) denotes an explicit directional vector,
u = (uxm , uys , uzj ) denotes a scale vector.

2.2. Meta-frontier and non-radial directional distance function

Hayami and Ruttan (1970) pioneered the idea that DMUs do not share a common pro-
duction technology, because of differences in economy, geography, market, and other
factors. Battese and Rao (2002) and Battese, Rao, and O’Donnell (2004) proposed
that the technical efficiency (TEE) of different groups can be compared with each
other through a meta-frontier model. This heterogeneity is the basic idea of the
meta-frontier (Battese et al., 2004; O’Donnell, Rao, & Battese, 2008). However, tra-
ditional DEA usually assumes that all producers have the same level of technology,
but the assessed DMUs are often under different geographical locations, national pol-
icies, socio-economic conditions, etc., which cause different technology levels. Therefore,
based on Färe and Grossopf (2010), Zhou et al. (2012) and Zhang et al. (2013) and the
non-radial directional distance function, O’Donnell et al. (2008) and the meta-frontier
model, and the meta-frontier non-radial directional distance function model, we set
up the model as follows.
 EUROPEAN PLANNING STUDIES 7

We separate the N DMUs into H subgroups, based on their production technologies.


H
The number of DMUs in the group h is N h , and N h = N. Each subgroup has its
h=1
own specific production technology, and the DMUs belonging to the same subgroup
have a homogeneous technology level under the group frontier.
Following Färe and Grossopf (2010), Zhou et al. (2012), and Zhang et al. (2013), we
obtain the value of D(X m , Y s , Z j ; g) after solving the following DEA model:
D(X m , Y s , Z j ; g) = max wxm uxm + wys uys + wzj uzj

H

N
s.t. ln xmn ≤ xm −uxm gxm , m = 1, · · · , M,
h=1 n=1

H


N
ln ysn ≤ ys −uys gys , s = 1, · · · , S,
h=1 n=1

H

N
ln Z jn ≤ zj −uzj gzj , j = 1, · · · , J,
h=1 n=1

h = 1...H uxm , uys , uzj ≥ 0 (2)

Since the meta-frontier contains the group frontier of g groups, the technical efficiency of
the meta-frontier (MFE) will be less than the technical efficiency of the group frontier (GFE).
The ratio value, called the technical efficiency gap ratio (or technology gap ratio, TGR), is:
r∗ MFE
TGR = ∗g = (3)
ro GFE

3. Empirical study
3.1. Data and variables
Based on the DEA model’s input and output items of the existing references, we collected
data of 28 EU countries and Norway from the Eurosata database spanning 2010–2015.
Table 1 lists the input and output items. Table 2 gives a statistical description of the
six-year-long data.
Input variables:

Total employment national concept (Labor):

Unit: 1,000 persons

Table 1. Input and output variables.

Input variable Desirable Output Bad output
Labor GDP CO2
Capital
Energy
Data source: https://ec.europa.eu/eurostat/data/database
8 X. TENG ET AL.

Table 2. Descriptive statistics of inputs and outputs.

Years Variables Average SD Min Max
2010 (I)Labor 7875.2 10447.8 163.8 40983.0
(I)Capital 90877.2 134221.4 1411.6 501449.0
(I)Energy 62024.0 84242.8 938.5 332486.9
(O)GDP 453517.3 683505.3 6599.5 2580060.0
(OB)CO2 113579138.9 154862927.8 3722536.0 695626532.0
2011 (I)Labor 7883.8 10522.0 168.6 41534.0
(I)Capital 94312.1 140961.3 1229.1 547821.0
(I)Energy 59564.4 80457.8 936.6 315814.6
(O)GDP 467576.0 705761.2 6836.2 2703120.0
(OB)CO2 111335588.2 151973620.3 3704146.0 685589587.0
2012 (I)Labor 7855.3 10576.2 172.8 42006.0
(I)Capital 94430.4 142175.1 1300.6 554746.0
(I)Energy 59161.4 80767.4 981.0 317887.2
(O)GDP 477948.0 726220.4 7160.6 2758260.0
(OB)CO2 108974713.0 152229551.4 3683040.0 692618471.0
2013 (I)Labor 7824.5 10576.0 179.3 42257.0
(I)Capital 93152.0 141052.6 1335.6 556752.0
(I)Energy 58651.9 81011.1 875.7 324532.8
(O)GDP 481766.8 733773.8 7638.5 2826240.0
(OB)CO2 105396326.2 151242590.5 3357807.0 703345995.0
2014 (I)Labor 7916.2 10698.1 188.5 42608.0
(I)Capital 96850.4 147544.2 1475.0 586555.0
(I)Energy 56419.3 77619.4 885.8 313239.3
(O)GDP 497287.5 766171.0 8449.1 2932470.0
(OB)CO2 101737700.9 144961247.5 3417754.0 678168190.0
2015 (I)Labor 8000.9 10808.6 195.9 42990.0
(I)Capital 102219.3 154466.9 2302.6 604285.0
(I)Energy 57155.4 78491.9 755.7 314203.0
(O)GDP 522270.8 811328.3 9266.1 3043650.0
(OB)CO2 102101609.5 144286439.7 3009523.0 675104031.0

Total fixed assets (gross) (Capital):

Unit: Current prices, Euro millions
Gross inland consumption (Energy):
Unit: 1,000 tons of oil equivalent (TOE)

Output variable:

Gross domestic product at market prices (GDP):

Unit: Current prices, Euro millions

Bad output variable:

CO2:
Unit: Tons

According to the level of economic development, we divide the 28 EU countries and

Norway into two different technical efficiency groups. The group of Western European
countries has high economic development levels and includes three Nordic countries,
for a total of 16 countries. The Middle and Eastern European countries joined the EU
after 2004, for a total of 13 countries.
 EUROPEAN PLANNING STUDIES 9

North-Western:
Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxem-
bourg, Netherlands, Norway, Portugal, Spain, Sweden, United Kingdom
Central-Eastern:
Bulgaria, Croatia, Cyprus, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta,
Poland, Romania, Slovakia, Slovenia
Table 3 depicts the statistics of energy consumption per GDP and CO2 emission per
energy consumption in the 29 countries from 2010 to 2015. Comparing the average
values of the North-Western European countries with those of the Central-Eastern Euro-
pean countries, we find a large gap. Therefore, for assessing the efficiency of energy and
CO2 emissions, we use the meta-frontier method to verify whether the technological
gaps between the two groups are significant.

3.2. Empirical analysis and results

We first use the non-radial directional distance function (DDF) model to estimate the
energy efficiency and CO2 emission efficiency ofthe29 DMUs. Table 4 shows the estimated
results. We find that the efficiencies of the 29 DMUs are relatively stable during the six
years from 2010 to 2015, and their averages remain around 0.9. We also note that
countries with an efficiency value of 1 (Effective production frontier), except for
Cypress in 2014, are North-West European countries, including Ireland, Luxembourg,
Sweden, and the UK. For the six years, these countries have been at the effective pro-
duction frontier. In addition, we observe that the average efficiency score for the six-
year period of the North-West European countries is around 0.95. In contrast, the
average efficiency score of the Central-Eastern European countries is around 0.8, which
shows that there are significant differences between energy efficiency and CO2 emissions
efficiency in the two groups. Figure 1 presentsthe significant difference in the analysis
results.
Based on the above results, we believe among all the 29 DMUs that there may be a gap
in the technical efficiencies of energy and CO2 emissions between the two groups of

Table 3. Comparing energy consumption per GDP and CO2 emissions per energy consumption
between the two groups.
Energy consumption per GDP CO2 emissions per energy consumption
Years Region Max Min Average SD Max Min Average SD
2010 North-Western 0.198 0.082 0.126 0.028 3.905 1.008 1.877 0.687
Central-Eastern 0.465 0.142 0.267 0.092 3.966 1.476 2.297 0.681
2011 North-Western 0.182 0.075 0.117 0.027 4.126 0.958 1.911 0.749
Central-Eastern 0.462 0.136 0.251 0.088 3.955 1.508 2.301 0.670
2012 North-Western 0.174 0.070 0.114 0.027 3.920 0.903 1.882 0.727
Central-Eastern 0.435 0.129 0.240 0.081 3.754 1.462 2.234 0.644
2013 North-Western 0.168 0.069 0.112 0.026 3.849 0.875 1.827 0.718
Central-Eastern 0.399 0.115 0.229 0.080 3.834 1.433 2.218 0.664
2014 North-Western 0.169 0.063 0.106 0.028 3.820 0.870 1.836 0.708
Central-Eastern 0.415 0.105 0.221 0.083 3.858 1.463 2.223 0.673
2015 North-Western 0.158 0.054 0.103 0.028 3.730 0.908 1.824 0.670
Central-Eastern 0.409 0.082 0.213 0.081 3.982 1.460 2.197 0.681
Notes: Energy consumption per GDP, unit: oil equivalent per Euro 1,000; CO2 emissions per energy consumption, unit: tons
per oil equivalent ton; SD: Standard deviation.
10 X. TENG ET AL.

Table 4. Energy and CO2 emissions efficiencies from the DDF model.
2010 2011 2012 2013 2014 2015
DMU Score Rank Score Rank Score Rank Score Rank Score Rank Score Rank
Austria 0.963 9 0.936 10 0.942 12 0.938 14 0.939 12 0.91 12
Belgium 0.899 18 0.899 16 0.906 15 0.905 17 0.882 18 0.853 19
Denmark 1 1 1 1 1 1 1 1 1 1 0.99 7
Finland 0.863 21 0.872 20 0.885 18 0.901 18 0.901 17 0.891 15
France 1 1 0.994 8 0.985 8 0.981 11 1 1 1 6
Germany 0.911 13 0.892 18 0.905 16 0.914 16 0.906 16 0.896 14
Greece 0.94 10 1 1 1 1 1 1 1 1 1 1
Ireland 1 1 1 1 1 1 1 1 1 1 1 1
Italy 0.964 8 0.952 9 0.972 10 1 1 0.993 10 0.973 9
Luxembourg 1 1 1 1 1 1 1 1 1 1 1 1
Netherlands 0.909 14 0.903 15 0.94 13 0.959 12 0.939 13 0.898 13
Norway 1 1 1 1 1 1 1 1 1 1 0.946 11
Portugal 0.905 16 0.914 12 0.969 11 0.998 9 0.974 11 0.954 10
Spain 0.925 11 0.904 14 0.907 14 0.943 13 0.914 15 0.891 16
Sweden 1 1 1 1 1 1 1 1 1 1 1 1
United Kingdom 1 1 1 1 1 1 1 1 1 1 1 1
Bulgaria 0.846 24 0.844 24 0.745 26 0.73 27 0.707 27 0.708 28
Croatia 0.862 22 0.862 22 0.862 20 0.858 19 0.853 19 0.852 20
Cyprus 0.905 17 0.898 17 0.974 9 0.994 10 1 1 0.989 8
Czech Republic 0.734 28 0.734 28 0.714 27 0.719 28 0.692 29 0.689 29
Estonia 0.738 27 0.736 27 0.668 29 0.682 29 0.704 28 0.717 27
Hungary 0.876 19 0.875 19 0.855 21 0.83 22 0.793 23 0.794 23
Latvia 0.818 25 0.818 25 0.758 25 0.801 23 0.809 21 0.809 21
Lithuania 0.907 15 0.905 13 0.871 19 0.848 20 0.806 22 0.803 22
Malta 0.92 12 0.921 11 0.896 17 0.938 14 0.937 14 0.859 18
Poland 0.851 23 0.849 23 0.779 24 0.785 25 0.739 25 0.748 24
Romania 0.722 29 0.721 29 0.683 28 0.732 26 0.718 26 0.721 26
Slovakia 0.78 26 0.779 26 0.793 23 0.795 24 0.777 24 0.742 25
Slovenia 0.863 20 0.863 21 0.855 22 0.842 21 0.85 20 0.862 17
Average 0.902 0.899 0.892 0.9 0.891 0.879
Max 1 1 1 1 1 1
Min 0.726 0.721 0.668 0.682 0.692 0.689
St Dev 0.079 0.085 0.105 0.103 0.109 0.105
Ave. of N&W 0.955 0.954 0.963 0.971 0.965 0.95
Ave. of C&E 0.832 0.831 0.804 0.812 0.799 0.792

countries. Therefore, we use the meta-frontier model to take the above estimated results as
the meta-frontier efficiency (MFE) and separately estimate the two groups to obtain their
respective group-frontier efficiency (GFE).
We find the technical efficiency gap ratio between the efficiencies of the respective
groups and the meta-frontier boundary by (4). Table 5 shows the analysis results. Since
most countries in North-Western Europe are at the effective frontiers on the boundary,
their average technical efficiency gap ratio for most years is 1. The efficiency of the
Central-Eastern European countries still shows a large distance from the meta-frontier
boundary, and the average efficiency scores in the six years are between 0.87 and 0.93.
Whether or not there is a significant technical efficiency gap between these two groups,
we need to judge it through statistical tests.

3.3. Statistical test

We apply the Wilcoxon Scorer Test to examine if there is evidence of significant differ-
ences in energy and CO2 emissions efficiencies between the two groups of North-West
Europe and Central-Eastern Europe. We set the confidence interval to be 0.01, 0.05,
 EUROPEAN PLANNING STUDIES 11

Figure 1. Average efficiency of the meta-frontier from 2010 to 2015.

and 0.1 and compare the p-values to see if there is a significant difference in the average
TGR value between the two groups. Table 6 summarizes the verification result.
We find that the p-values of the average TGR test for both groups are less than the alpha
value. This result represents that at the 99% significance level, there is evidence during
2010–2015 showing that there are significant differences in energy and CO2 emissions
efficiencies between the two groups. It can also be argued that there are significant tech-
nological gaps in the performances of energy and CO2 emissions between the two groups.

4. Discussion
4.1. Technology gap and performance improvement
Based on the above results’ estimates and statistical tests, we believe that there are signifi-
cant TGR values in the 29 European countries. Under the framework of the Paris Agree-
ment, when the EU proposes to reach its CO2 emissions targets, it must first face up to the
fact that there are inter-regional technological differences within its own union, and attach
importance to this as an objective condition for internal policy coordination. Reducing the
technological differences among internal regions may be an effective way for Europe to
increase energy and CO2 emissions efficiencies, and it can be used as a reference for devel-
oped countries and developing countries in the world to jointly improve their energy and
emission efficiencies.
Although the efficiency value based on the 2010–2015 data has been relatively stable for
six years. We observe that the room for energy improvement and CO2 emission improve-
ment in Central-Eastern European countries actually show different trends. While the
12 X. TENG ET AL.

Table 5. TGR between MFE and GFE from 2010 to 2015.

DMU 2010 2011 2012 2013 2014 2015
Austria 1 1 1 1 1 1
Belgium 1 1 1 1 1 1
Denmark 1 1 1 1 1 1
Finland 1 1 1 1 0.9944831 1
France 1 1 1 1 1 1
Germany 1 1 1 1 0.9977961 1
Greece 1 1 1 1 1 1
Ireland 1 1 1 1 1 1
Italy 1 1 1 1 1 1
Luxembourg 1 1 1 1 1 1
Netherlands 1 1 1 1 0.9920744 1
Norway 1 1 1 1 1 1
Portugal 1 1 1 1 0.9880276 1
Spain 1 1 1 1 0.999235 1
Sweden 1 1 1 1 1 1
United Kingdom 1 1 1 1 1 1
Bulgaria 0.9797266 0.9128083 0.8984686 0.9116326 0.9936762 0.927318
Croatia 0.8619 0.8943056 0.9005958 0.908523 0.8654158 0.8518704
Cyprus 0.9049 0.8978 0.9735 0.9944 1 0.9894
Czech Republic 0.8300905 0.8867947 0.9037731 0.9202713 0.888946 0.8519525
Estonia 0.7797845 0.9047795 0.902973 0.8894689 0.8915495 0.9027061
Hungary 0.8818969 0.8990345 0.9547941 0.9082448 0.8457192 0.8513398
Latvia 0.8470625 0.8855441 0.7976015 0.830173 0.809 0.8089
Lithuania 0.9067 0.9090635 0.9376883 0.9776214 0.9409086 0.954232
Malta 0.9204 0.9206 0.9235367 0.938 0.9369 0.8589
Poland 0.8987542 0.9131276 0.9012031 0.915355 0.9950182 0.9526054
Romania 0.8531427 0.888136 0.9608671 0.9583824 0.8841133 0.879283
Slovakia 0.8206505 0.892276 0.9551645 0.9807526 0.9103586 0.8656629
Slovenia 0.8648297 0.8964156 0.9619669 0.9483224 0.849785 0.8670491
Ave. of N&W 1 1 1 1 0.998226 1
Ave. of C&E 0.8730645 0.9000527 0.9209333 0.929319 0.9085685 0.8893246

room for energy improvement is shrinking, the room for improving CO2 emissions has
expanded. Tables 7 and 8 give the spatial analysis results of the room for improvement
in energy and CO2 emissions, respectively, while Figures 2 and 3 show the comparison
charts of the room for improvement for the two in 2010 and 2015, respectively.
This means that in the Central-Eastern European countries, during these six years, the
efficiency of energy use has increased significantly, which has greatly reduced the efficiency
gap for countries in North-Western Europe. The remaining technical efficiency gap
mainly stems from the widening of the differences in CO2 emissions efficiency. In the
six years, the CO2 emissions efficiency of Central-Eastern European countries compared
to North-Western Europe has not narrowed the gap, but in fact has conversely widened
the gap.

Table 6. Wilcoxon scorer test of average TGR.

Years Average TGR of N&W Average TGR of C&E Wilcoxon scorer test
2010 1.0000 0.8731 <.0001***
2011 1.0000 0.9001 <.0001***
2012 1.0000 0.9209 <.0001***
2013 1.0000 0.9293 <.0001***
2014 0.9982 0.9086 0.0002***
2015 1.0000 0.8893 <.0001***
Note: ***On behalf of the two-tailed test, the confidence interval 0.01 is significant.
 EUROPEAN PLANNING STUDIES 13

Table 7. Room for energy improvement from 2010 to 2015.

DMU 2010 2011 2012 2013 2014 2015
Austria 3.701 6.394 5.778 6.2 6.085 22.228
Belgium 23.212 22.562 20.234 26.034 27.424 35.302
Denmark 0 0 0 0 0 0.999
Finland 33.728 47.274 36.068 32.802 39.076 41.088
France 0 3.864 5.341 8.294 0 18.999
Germany 8.875 16.133 9.512 8.592 9.45 10.411
Greece 5.995 0 0 0 0 0
Ireland 0 0 0 0 0 0
Italy 3.648 4.771 2.816 0 9.205 12.786
Luxembourg 0 0 0 0 0 0
Netherlands 9.153 27.882 15.97 9.012 6.124 10.159
Norway 0 0 0 0 0 28.354
Portugal 9.469 14.634 14.933 17.233 17.328 14.056
Spain 7.523 9.612 10.914 9.477 18.447 19.319
Sweden 0 0 0 0 0 0
United Kingdom 0 0 0 0 0 0
Bulgaria 71.14 66.446 58.394 57.284 57.499 56.173
Croatia 36.607 36.744 37.82 37.374 38.024 40.154
Cyprus 9.508 10.222 5.874 3.249 0 2.534
Czech Republic 45.149 44.969 44.184 44.573 43.079 41.577
Estonia 60.663 54.275 54.13 54.566 54.937 49.276
Hungary 49.441 46.323 46.351 46.259 46.558 46.536
Latvia 36.881 37.511 39.775 38.111 41.025 38.071
Lithuania 43.586 34.403 29.888 27.734 23.871 23.52
Malta 8.891 7.944 10.379 6.202 6.308 14.111
Poland 49.908 41.76 29.782 34.325 26.097 25.225
Romania 46.411 40.549 40.207 36.279 34.852 32.161
Slovakia 42.699 37.263 34.936 37.427 35.143 36.421
Slovenia 33.869 31.486 31.13 31.755 33.553 30.641
Average 23.904 22.173 20.152 19.751 19.796 22.417
St Dev 23.508 20.102 18.777 18.942 19.036 17.114
Ave. of N&W 6.582 9.570 7.598 7.353 8.321 13.356
Ave. of C&E 41.135 37.684 35.604 35.011 33.919 33.569

Figure 2. Comparison of room for energy improvement between 2010 and 2015.

As a cause for the above analysis results, we believe in the past six years that the process
of replacing fossil energy with new energy sources in the countries of North-Western
Europe has been very rapid. Spurred by factors such as effective government subsidies
14 X. TENG ET AL.

Table 8. Room for CO2 emissions improvement from 2010 to 2015.

DMU 2010 2011 2012 2013 2014 2015
Austria 3.701 6.394 5.778 6.2 6.085 9.051
Belgium 10.124 10.082 9.379 9.535 11.803 14.749
Denmark 0 0 0 0 0 1.002
Finland 13.729 12.78 11.525 9.901 9.872 10.919
France 0 0.613 1.485 1.87 0 0.017
Germany 8.876 10.758 9.512 8.593 9.451 10.411
Greece 5.996 0 0 0 0 0
Ireland 0 0 0 0 0 0
Italy 3.648 4.771 2.816 0 0.727 2.684
Luxembourg 0 0 0 0 0 0
Netherlands 9.154 9.711 5.983 4.124 6.124 10.159
Norway 0 0 0 0 0 5.442
Portugal 9.469 8.579 3.087 0.157 2.617 4.609
Spain 7.523 9.612 9.342 5.704 8.567 10.93
Sweden 0 0 0 0 0 0
United Kingdom 0 0 0 0 0 0
Bulgaria 15.429 15.628 25.488 26.965 29.29 29.189
Croatia 13.811 13.781 13.841 14.185 14.671 14.828
Cyprus 9.509 10.223 2.648 0.564 0 1.063
Czech Republic 26.623 26.602 28.621 28.092 30.84 31.063
Estonia 26.177 26.366 33.177 31.838 29.634 28.286
Hungary 12.413 12.472 14.462 17.047 20.677 20.57
Latvia 18.255 18.215 24.177 19.879 19.097 19.105
Lithuania 9.333 9.533 12.874 15.248 19.434 19.733
Malta 7.958 7.947 10.381 6.205 6.311 14.114
Poland 14.87 15.069 22.102 21.488 26.097 25.226
Romania 27.791 27.908 31.74 26.768 28.208 27.889
Slovakia 22.035 22.137 20.753 20.506 22.311 25.834
Slovenia 13.694 13.718 14.51 15.773 15.027 13.851
Average 9.8022 10.1 10.8166 10.0221 10.9256 12.0939
St Dev 7.8564 8.4806 10.4657 10.3116 10.909 10.4459
Ave. of N&W 4.514 4.581 3.682 2.880 3.453 4.998
Ave. Of C&E 16.761 16.892 19.598 18.812 20.123 20.827

Figure 3. Comparison of room for CO2 emissions improvement between 2010 and 2015.

and lower operating costs, the United Kingdom, Spain, and Germany has shown rapid
growth in wind power and solar power generation in Western Europe. Nuclear power
is the main source of electricity in France. With good hydropower resources, the main
 EUROPEAN PLANNING STUDIES 15

supply of hydroelectricity in Northern Europe supplemented by wind-powered solar

energy, accounts for over 50% of the entire power system.
The Central-Eastern European countries still use traditional fossil-energy thermal
power generation as the main source of electricity, and they are far behind the countries
in North-Western Europe in the use of new energy. Therefore, for the former the positive
effect of a relative increase in energy use efficiency is covered by the negative effect of rela-
tively low CO2 emissions efficiency. Thus, they cannot narrow the technical efficiency gap
with countries in North-Western Europe.
Based on the above analysis, we believe that accelerating the process of replacing tra-
ditional fossil energy with new energy in Central-Eastern Europe, thus reducing the tech-
nical efficiency gap between European regions, is an effective way for Europe to increase
energy efficiency and CO2 emissions efficiency. Based on the experience of Western
Europe in the process of promoting new energy, a long-term and adequate cost-subsidy
behaviour is indispensable. Intergovernmental assistance can be sent from the countries
of North-Western Europe to the countries of Central-Eastern Europe, or the European
Bank for Reconstruction and Development (EBRD) and the European Investment Bank
(EIB) can set up special projects to raise funds for emission reductions in Central-
Eastern Europe and use bond markets, carbon trading markets, and other means to
obtain more funding sources.

4.2. Performance improvement for specific countries

Considering the Paris Agreement that is based on the bottom-up approach, we further
discuss energy and CO2 emission efficiency improvement for specific countries.
Figure 4 shows a four-quadrant map of energy efficiency associated with the six-year

Figure 4. Efficiency values depending on energy consumption per GDP and CO2 emissions per energy
consumption.
16 X. TENG ET AL.

average of energy consumption per GDP and CO2 emissions per energy consumption. We
intuitively see that DMUs with higher energy consumption per GDP and higher CO2
emissions per energy consumption have lower energy efficiency value. Countries with
higher efficiency values are mainly concentrated in North-Western Europe. As bench-
marks, Denmark and Ireland have lower energy intensities, which are 0.070 and 0.075
oil equivalent per thousand euro. The high efficiency values of France and Sweden
depend on lower carbon emissions intensity, which are 0.960 and 0.923 tons per ton of
oil equivalent. On the other hand, We notice that countries with efficiency values lower
than 0.8 are all from Central-Eastern Europe, such as Estonia (0.707), Czech Republic
(0.714), Romania (0.716), Bulgaria(0.763), Slovakia (0.777), Poland (0.791), their energy
intensities and carbon emission intensities are significantly higher than that of other
countries. Reducing energy intensity is an effective way to improve energy efficiency for
those countries, such as Bulgaria, Estonia, Czech Republic, Poland, Romania, Hungary,
etc. Meanwhile, reducing carbon emissions intensity is applicable for others like Malta,
Greece, Cyprus, Poland, Estonia, etc.
Some scholars have noted that the transfer of high carbon emissions industries from
regions in China with high environmental standards to regions there with low environ-
mental standards leads to a widening of the environmental efficiency gap. We believe
this situation also currently exists in EU. The Central-Eastern European countries
should restrict the transfer of high carbon emissions industries, such as those of Bulgaria,
Poland, Romania, etc., while the North-Western European countries should encourage
investment in emissions reduction instead of industrial transfer.
The North-Western European countries actively plan and support the long-term sus-
tainable development of renewable energy, which is worth learning from the Central-
Eastern European countries. For instance, Sweden has become the country with the great-
est environmental friendliness, and began to develop renewable energy as early as the
1970s. Since 1991, Germany has provided high subsidies for renewable energy, and
then become one of the countries with the largest amount of renewable energy investment
in the world. France enacted an emerging energy plan in 2008, requiring that at least one
photovoltaic power station be established in each of France’s regions from 2008 to 2011,
with a total power generation of 300 MW. As the global leader in bioenergy, the UK
enacted a strategy to guide the sustainable development of bioenergy in 2012. In addition,
the UK’s experience in developing offshore wind power is also worth learning from coastal
countries in Central and Eastern Europe. In the Central-Eastern European countries,
Hungary continues to support the development of renewable energy from the KÁT
scheme in 2007 which was replaced by the METÁR scheme in 2017. From the results
in Figure 4, even the two countries have similar energy consumption intensity, Hungary’s
energy and CO2 emission performance is much better than Romania, Which canceled the
subsidy policy for renewable energy generation after 2013.
Figures 5 and 6 show a comparative graph of energy efficiency improvements and CO2
emissions improvement efficiency for North-Western Europe (excluding countries that
are at the effective production frontiers) and Central-Eastern Europe (excluding Cyprus
and Malta) using the mean value for 2010–2015.
As shown in Figure 5, the average room for improvement of energy use in North-
Western European countries is 14.98%, which is higher than their room for improvement
in CO2 emissions at 6.91%. Countries such as Finland and Belgium need to pay more
 EUROPEAN PLANNING STUDIES 17

Figure 5. Room for energy and CO2 improvement of North-Western Europe.

attention to changes in efficiency. Their rooms for improvement both in energy use
efficiency and carbon emissions efficiency are greater than those of other countries.
These two countries are in North-Western Europe and need to make more efforts at
energy conservation and CO2 emissions reduction. As another example, Portugal has
greater room for energy use improvement at 14.61% than its room for CO2 emissions
improvement at 4.75%. To increase its energy efficiency and CO2 emissions efficiency,
it should pay more attention to improvement in energy efficiency.
As shown in Figure 6, in the Central-Eastern European countries the rooms for
improvement in both energy efficiency and CO2 emissions efficiency are generally signifi-
cantly larger than that for countries in North-Western Europe. The average value reaches
41.43% and 21.09%. In particular Bulgaria, Estonia, and Hungary have energy use
improvement at 61.16%, 54.64% and 46.91%, higher than other countries. At the same
time, the rooms for improvement of CO2 emissions in Estonia, Czech Republic and
Romania are 29.24%, 28.64% and 28.38%, clearly higher than average.
We believe that countries with greater room for energy efficiency improvement can
adopt structural adjustments to cultivate low-energy industries and introduce energy-
saving technologies to reduce energy consumption per GDP, and to improve energy
efficiency. However, countries with large room for CO2 emissions improvement should
speed up the process of new energy alternatives over traditional fossil fuels.

5. Conclusions
The Paris Agreement formally legally determined the governance methods that use
national independent contributions instead of overall reduction targets. Countries
around the world have different national conditions, economic development stages, and
18 X. TENG ET AL.

Figure 6. Room for energy and CO2 improvement of Central-Eastern Europe.

different social cultures. Therefore, we believe that the technical efficiency gap in energy
savings and emissions reduction can be quite wide. The inclusive nature of the bottom-
up mechanism of the Paris Agreement as such has won wide participation and recognition
from the international community.
In response to the greenhouse effect, the EU plays a leading role in the world. As the
technical efficiency gap of energy and CO2 emissions reduction is significant between
the Central-Eastern European countries and North-Western European countries, this
study proposes that each country on the European continent must first of all effectively
improve its energy and CO2 emissions performances by reducing the technical
efficiency gap between each other. Narrowing the technical efficiency gap will not only
improve the efficiency of the EU itself, but also achieve the goals in the Paris Agreement.
The EU can also become a reference for countries around the world, especially developing
countries with unbalanced regional development, such as China. Methodologically, this
study applies a meta-frontier non-radial directional distance function to analyze energy
and CO2 emissions efficiencies and compares the change in technical efficiency gap
between Central-Eastern European countries and North-Western European countries.
Our main findings are as follows.
Firstly, North-Western European countries are the benchmark under meta-frontier
technologies and hence have no meta-technology gaps. By contrast, there are significant
meta-technology gaps between the group-frontier and meta-frontier for Central-Eastern
European countries.
Secondly, while the energy efficiency of Central-Eastern Europe has improved, its gap
in CO2 emission efficiency with North-Western Europe has increased. Hence, this is an
important reason why the technical efficiency gap between Central-Eastern Europe and
North-Western Europe did not shrink during the six-year sample period.
 EUROPEAN PLANNING STUDIES 19

Finally, we estimate the room for improvement in both energy efficiency and CO2 emis-
sions efficiency in every country. Based on these values, reducing energy intensity or redu-
cing CO2 emissions intensity can be a policy choice for European countries to improve
their performance. According to the above results, this study puts forward the following
policy implications.
We believe that accelerating the process of new energy alternatives over traditional
energy in Central-Eastern European countries may be an effective way to improve CO2
emissions efficiency and reduce the technical efficiency gap. The technology and experi-
ence of using renewable energy by the North-Western European countries such as
Germany, France, and the UK, are worth learning for the Central-Eastern European
countries. Financial institutions such as EBRD and EIB and market instruments such as
carbon emissions trading should provide greater convenience for the development of
renewable energy industries in Central-Eastern European countries.
It is worth pointing out that the distribution of high carbon emission industries in
different countries is the cause for the widening gap between the North-Western Euro-
pean countries and Central-Eastern European countries. More specifically, in order to
improve energy performance and narrow the gap with the North-Western European
countries, the Central-Eastern European countries should encourage low-energy, low-
emission clean industries and restrict industries with high carbon emissions when
undertaking the transfer of industries from North-Western European countries. On
the other hand, when implementing stricter environmental standards, the North-
Western European countries should encourage investment in reducing carbon emissions
and enhancing energy savings in order to improve their performance of existing high
carbon emissions industries, instead of shifting high carbon emissions industries
elsewhere.
The Paris Agreement is based on the bottom-up approach. It is therefore important to
analyze the rooms for improvement of energy use and CO2 emissions of specific countries.
Doing so should help in formulating specific national strategies and improving a country’s
energy and CO2 emissions performances.

Disclosure statement
No potential conflict of interest was reported by the authors.

ORCID
Yung-Ho Chiu http://orcid.org/0000-0002-9702-2892

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