Towards a sustainable future in the European Union: Reducing carbon emissions and transitioning to a green economy

Green Deal is essentially an initiative to transform the European economy and consumption patterns in Europe. However, due to its inclusion of a fundamental restructuring of the European energy system and its high priority on the EU's political agenda, the Green Deal will have an impact on relations between the EU and its neighbors and will redefine Europe's global political priorities. Thus, the Green Deal is inevitably becoming a part of a foreign policy that will lead to serious geopolitical consequences. The aim of the study is to deepen the conceptual foundations of sustainable development using green economy tools and to assess factors affecting carbon emissions. The analysis section of the study aims to test the causal relationship between electricity generation from renewable and non-renewable energy sources, economic growth, energy tax revenue, and carbon emissions in EU countries. To achieve this goal, panel data of EU countries from 1990 to 2020 was utilized. First, a unit root test and then a Granger causality test were applied. According to the results of the analysis, an unidirectional causality from solar and hydroelectric power generation to carbon emissions was identified in EU countries. Based on the impulse-response functions, solar and hydroelectric power are important resources to be utilized in reducing carbon emissions. Additionally, the results indicate that positive shocks in natural gas applications lead to an initial increase in carbon emissions, followed by a decreasing trend over time. The shift from coal to gas in recent periods contributes to reducing carbon emissions. Furthermore, there is a causal relationship from carbon emissions to natural gas. Policies aimed at reducing carbon emissions, such as decreasing coal production, can increase the use of natural gas. It was determined that per capita GDP and energy tax revenue influence CO2 emissions. Economic growth generally increases energy demand, which can later lead to increased carbon emissions. Energy tax revenue initially raises carbon emissions but eventually results in a decrease over time. This situation suggests that the effects of the carbon tax implemented in the EU since 1990 may not be immediately felt and need to be evaluated based on a long-term perspective. İn a result economic growth and energy policies need to be taken into account while reducing CO₂ emissions. These findings highlight the significant role of green energy sources in reducing carbon emissions and emphasize the importance of energy policies. Keywords: Green Economy, Carbon Emissions, European Union, Causality analysis, Green Deal.