The Role of Environmental Protection Expenditures in the Green Transition of EU Countries

Idea of fiscal stimulus by governments and EU funding in Member States’ economies is to support the process of restructuring and decarburization of economies, to promote thier adaptation to climate change, without undermining fiscal stability. The objective of this study is to analyze the dynamics and structure of environmental protection expenditure in EU countries in the context of the economy ecological transformation. Similarities and differences between EU States in terms of environmental protection expenditure have been examined based on cluster analysis. Several groups of countries homogeneous by the size, dynamics and structure of environmental protection expenditure have been identified based on a set of key indicators. Identified clusters directly reflect the differences of the environmental policies implemented in member states and thus indicate the different intensity of greening in the countries. Relationship between the expenditures and reduction of GHG emissions is analyzed. Results show that public policies in EU countries can be a valuable tool for transition to green economy, but they should not undermine the fiscal sustainability of the EU. Environmental policy is expected to be a catalyst predominantly for private investment and the companies to be the major driving force of the green transition.