Investments in the green transition and their impact on economic growth and competitiveness in the European Union

Abstract

Research background:The European Union’s transition towards a green and sustainablegrowth paradigm has been accelerated by flagship initiatives such as the European Green Deal, the NextGenerationEU Recovery Plan, and the Just Transition Mechanism. While the literature increasingly addresses renewable energy, energy efficiency, and circular economy dynamics, empirical evidence on how climate-related investments, public environmental expenditure, technological innovation, and structural disparities interact to shape competitiveness remains limited. Existing studies often analyze these factors in isolation, overlooking their systemic interdependencies and the heterogeneity among EU member states. Purpose of the article: This study examines how green transition investments shape economic competitiveness and circular value-added in the European Union. It evaluates the effects of climate mitigation spending, environmental protection, energy efficiency, renewable integration, and R&D on sustainable performance while considering national heterogeneity. By capturing these interdependencies, the article advances the theoretical and empirical understanding of the green transition. Methods: A quantitative econometric framework based on panel data for the 27 EU member states over the period 2010–2023 was employed. The analysis relies on official Eurostat indicators capturing climate investment, public environmental expenditure, energy intensity, renewable energy share, gross R&D expenditure, and aggregate green capital. Findings & value added: The analysis demonstrates that targeted green investments and R&D foster circular economic growth, whereas energy inefficiency and poorly integrated renewables constrain performance. Cross-country disparities highlight uneven institutional capacities, pointing to the need for adaptive yet coordinated EU strategies to ensure climate neutrality and sustainable competitiveness. The study also offers a generalizable theoretical perspective by illustrating how green investment, innovation capacity, and energy efficiency jointly shape circular economic performance, providing long-term relevance for sustainability transitions across diverse economic contexts.