Financing green and digital transition: Assessing regional patterns

Publication EMN Working papers

Authors

Javier Barbero
Economic Analyst - European Commission, Joint Research Centre

Anabela M. Santos
Economic Analyst - European Commission, Joint Research Centre

Ernesto Rodríguez-Crespo
Assistant Professor - Universidad Autónoma de Madrid Department of Economic Structure and Development Economics

Abstract

Given the existence of substantial spatial disparities at subnational level for European regions, understanding geographical patterns of green (or green digital) projects appear to be of extreme importance to support policy design and to make policy more effective and inclusive. The present paper aims to provide empirical evidence of the geographical location and concentration patterns of ERDF (European Regional Development Fund) projects associated with green and/or digital investments. Using a novel and unique dataset of ERDF projects during the 2014-2020 period covering 238 regions of the 27 EU countries, we perform a cross-sectional analysis for the 2014-2020 ERDF projects explained by regional characteristics in 2014. Our empirical framework is threefold: first, we apply text analysis to identify whether projects´ description are associated to green and digital technologies investments, thanks to the existing taxonomy in the ERDF database. Second, we estimate a location indicator and, finally, we apply a binary choice regression model to explain the factors pertaining concentration of ERDF projects in the above-mentioned areas. We find that ERDF green and green-digital projects follow a similar spatial pattern, since they tend to be concentrated in the most polluting regions and associated to network collaboration in these areas. Both the qualification of human resources and the quality of governance in a region seem to be more relevant when explaining the location of digital technologies projects than for green (green-digital) projects. We acknowledge the amount of funds devoted to green and green-digital projects is larger than the average, and shows a lower likelihood to be supported by a micro-subsidy (lower than €25,000).