Dynamic Connectedness and Spillover Effects of CO2 Emissions Among EU Countries: Evidence from the TVP-VAR Connectedness Approach

Abstract This study explores spillover effects of carbon emissions among the 16 EU countries from 1980Q1 to 2023Q3, employing the TVP-VAR connectedness methodology introduced by Antonakakis et al. (2020). The findings reveal high connectedness, i.e. substantial spillover among the EU countries. Regarding net connectedness measures, the main transmitters of CO₂ emissions are Germany and the UK whereas the main receivers are Greece and Bulgaria. This high connectedness underscores the importance of collaborative efforts among EU countries in formulating policies to mitigate environmental degradation. The findings also indicate a positive correlation between economic activity and pollution, with higher-income countries tending to contribute more to pollution spillover. Our results further suggest that EU member states should endeavor to increase the use of renewable energy sources while phasing out nonrenewable ones, in accordance with the overarching objective of environmental protection, which is to ensure effective environmental protection.