Assessing environmental performance in the European Union: Eco-innovation versus catching-up

This paper assesses environmental performance in the European Union (EU) using Luenberger productivity indicators, directional distance functions and Data Envelopment Analysis techniques. It considers four indicators of the pressures exerted by economic activity on the environment: global warming, tropospheric ozone formation, acidification and particulate formation. The change in environmental performance from the early 2000s onwards is decomposed at the levels of country and environmental pressure, and as the result of eco-innovations and catching-up with the best available environmental technologies; furthermore, we distinguish between the periods of economic growth (2001-07) and severe crisis (2007-13). Our main finding is that environmental performance improved in both periods, mainly fuelled by advances in environmental technology. Accordingly, environmental policies aimed at boosting catching-up are highly recommended, particularly in the newer member states that joined the EU from 2004 onwards, which perform further away from their respective environmental technological frontiers. In addition, re-establishing the pre-crisis eco-innovation investment levels would also be highly advisable in order to return to the rates of environmental technical progress registered in the expansion period.