EEA Report No 23/2019 The sustainability transition in Europe in an age of demographic and technological change An exploration of implications for fiscal and financial strategies ISSN 1977-8449 enable significant sharingreport investment together changesEurope population play major meet technologicalfinancial policy new effects sustainabilitywork longterm green require forms fiscalpublicsector ageing critical social recent tools labour climate transitionrole energy incentives key systems finance society EUEuropean environment costs private areas strategy change ways achievinglevels different create EEA Report No 23/2019 The sustainability transition in Europe in an age of demographic and technological change An exploration of implications for fiscal and financial strategies Cover design: EEA Cover image: EEA Layout: Rosendahls a/s Legal notice The contents of this publication do not necessarily reflect the official opinions of the European Commission or other institutions of the European Union. Neither the European Environment Agency nor any person or company acting on behalf of the Agency is responsible for the use that may be made of the information contained in this report. Brexit notice The withdrawal of the United Kingdom from the European Union did not affect the production of this report. Data reported by the United Kingdom are included in all analyses and assessments contained herein, unless otherwise indicated. Copyright notice © European Environment Agency, 2020 Reproduction is authorised provided the source is acknowledged. More information on the European Union is available on the Internet (http://europa.eu). Luxembourg: Publications Office of the European Union, 2020 ISBN 978-92-9480-238-5 ISSN 1977-8449 doi:10.2800/571570 European Environment Agency Kongens Nytorv 6 1050 Copenhagen K Denmark Tel.: +45 33 36 71 00 Internet: eea.europa.eu Enquiries: eea.europa.eu/enquiries Contents Contents Authors and acknowledgements .............................................................................................. 5 Executive summary .................................................................................................................... 6 1 Multiple transition and EU policies ..................................................................................... 9 1.1 Background to and motivation for the report ..................................................................... 9 1.2 Overall political context and aims of the report ...............................................................10 1.3 Report structure ....................................................................................................................11 2. Demographic transition ..................................................................................................... 13 Key findings ....................................................................................................................................13 2.1 Introduction ...........................................................................................................................13 2.2 European population trends and projections ...................................................................14 2.3 Exploring the environmental implications of the demographic transition ....................15 2.4 Effects of ageing on growth and fiscal sustainability ........................................................22 3. Technology and innovation — drivers of the transition to sustainability? ................. 28 Key findings ....................................................................................................................................28 3.1 Introduction ...........................................................................................................................28 3.2 Technology — the disruptive and creative engine: a new regime of growth and labour in an ageing society?................................................................................................ 29 3.3 Environmental consequences of the technological transition: all good? .......................33 3.4 Eco-innovation and green technologies: how much do they influence the technological transition..................................................................................................................35 4. Fiscal and financial transition ........................................................................................... 46 Key findings ....................................................................................................................................46 4.1 Introduction ...........................................................................................................................46 4.2 Public budgets in European countries — past trends and future outlook ....................47 4.3 The future: fiscal sustainability and the green economy .................................................55 4.4 Finance for the green economy transition .........................................................................58 4.5 A summary — fiscal competition, finance and the green economy transition .............67 5 Modelling the interactions between population ageing, technical change and fiscal sustainability..... ................................................................................................................... 70 5.1 The quantitative modelling approach .................................................................................70 5.2 The qualitative modelling framework: causal loop diagram ..........................................74 5.3 Main conclusions ...................................................................................................................76 Bio-waste in Europe — turning challenges into opportunities 3 Contents 6 Summary and reflections from a systemic perspective ................................................. 77 6.1 A wealth of interactions: how do demographic and technological change and fiscal sustainability influence the environment?..................................................................................77 6.2 (Re)directing fiscal policies in response to a wealth of interactions ...............................78 6.3 In conclusion ..........................................................................................................................81 Abbreviations ............................................................................................................................ 82 References ................................................................................................................................. 83 Annex 1 ...................................................................................................................................... 97 4 The sustainability transition in Europe in an age of demographic and technological change Authors and acknowledgements Authors and acknowledgements The EEA and its European Topic Centre on Waste and WIFO (Austrian Institute of Economic Research), Materials in the Green Economy (ETC/WMGE) prepared Austria; Milan Chrenko, Ministry of Environment, this report. Slovakia; Pierre Strosser, ACTeon — Innovation, Policy, Environment, France; Toni Vidan, Green The EEA gratefully acknowledges contributions Action/Friends of the Earth Croatia and European from the European Environmental Information and Economic and Social Committee; Jonas Michael Teusch, Observation Network (Eionet), from the European Organisation for Economic Co-operation and Commission Directorate-Generals for Environment Development; Michal Miedzinski, University College and Climate Action and Eurostat, and from the London, United Kingdom; Nicola Cantore, United members of the Scientific Committee of the EEA, Nations Industrial Development Organization; and from Hans Bruyninckx, Anita Pirc-Velkavrh and Miroslava Janka, Directorate-General for Environment; Cathy Maguire (all EEA). Alessandro Antimiani, Directorate-General for Trade; and Krzysztof Wojtowicz, Joint Research Centre. The main authors of the report are Stefan Speck (EEA) and Roberto Zoboli (SEEDS). The report was Editorial support: co-authored by Susanna Paleari and Giovanni Marin (IRCrES-CNR), Massimiliano Mazzanti, Valeria Costantini, Bart Ullstein (ETC/WMGE), Gillian Whytock, Jim Daniell Nicolò Barbieri, Marianna Gilli, Alessio D'Amato (EEA) and Brendan Killeen (EEA) and Mariangela Zoli (SEEDS), Gorgia Sforna (Roma Tre University) and Andrea Bassi (KnowlEdge) — all EEA production support: partners of the ETC/WMGE (1). Carsten Iversen and Alejandra Bize (EEA) Jock Martin (EEA) provided direction and editorial guidance throughout the project. ETC/WMGE task manager: The authors are grateful to the participants of the Roberto Zoboli expert workshop 'How demographic and technological change, and fiscal-financial policies can influence EEA project manager: a European green economy transition', held in Copenhagen, 21-22 February 2019, who provided Stefan Speck valuable suggestions and comments: Angela Köppl, (1) IRCrES-CNR, Institute for Research on Firms and Growth, National Research Council, Milan, Italy; SEEDS, Sustainability Environmental Economics and Dynamic Studies, interuniversity research centre, Italy. Bio-waste in Europe — turning challenges into opportunities 5 Executive summary Executive summary EU policy clearly recognises that achieving long-term Sustainability in an ageing Europe sustainability will require fundamental transformation of the core