The contribution of the environmental goods and services sector (environmental or green economy) to the overall economy in the EU in terms of value added increased from 2.1% in 2010 to 2.5% in 2020, when it reached just over EUR 300 billion (2010 prices). This rise was mainly caused by significant increases in environmental economy activities related to renewable energy sources and energy efficiency and waste management. The EU aims to achieve a green transition and a carbon-neutral economy by 2050. This will require further significant increases in environmental economy activities. It is therefore expected that the EU’s environmental economy will account for an increasing share of the whole economy in the coming years.

Figure 1. Gross value added of the EU’s environmental goods and services sector by domain, 2010-2020

Gross value added of the EU’s environmental goods and services sector by domain, 2010-2020

The European Green Deal and the Eighth Environment Action Programme (8th EAP) aim to accelerate the green transition of the EU’s economy. The EU’s environmental goods and services sector, also known as the green economy, produces goods and provides services that are used in environmental protection and resource management.

The contribution of the environmental economy to the overall economy (i.e. to gross domestic product (GDP)) in the EU increased from 2.1% in 2010 to 2.5% in 2020. Over this period, the environmental economy increased by 2.7% annually, on average, while EU GDP increased by only 0.8%.

In terms of gross value added (GVA), all of the main domains of the green economy increased in the period 2010-2020. However, most growth was due to increases in the GVA of renewable energy and energy efficiency activities, followed by waste management activities. In 2020, green economy activities contributed a gross value added of EUR 301 billion (2010 prices) to the EU-27 economy.

The European Green Deal increases the ambition of EU environment and climate policy, to support the transition to a carbon-neutral, circular, green economy by 2050. As a result, it is expected that the contribution of the green economy to EU GDP will increase further in the coming years. For example, the application of circular economy principles across the EU economy is expected to increase EU GDP by an additional 0.5% by 2030 . Similarly, significant additional economic activity will be required to implement the ‘Fit for 55’ package , which aims to increase output from renewable energy sources, such as solar energy or offshore wind sources, and improve energy efficiency.

Additional resources have been made available to support the expansion of the EU’s environmental economy. The EU’s 2021-2027 budget has earmarked additional funding for climate- and biodiversity-related activities . Moreover, grants and loans are available through the 2021-2026 EU Recovery and Resilience Facility (RRF) for climate-related activities and through the 2022-2027 REPowerEU plan for activities related to renewable energy and energy efficiency. The RRF was created to mitigate the social and economic impacts of the COVID-19 pandemic, while the REPowerEU plan was devised to rapidly reduce the EU’s dependence on Russian fossil fuels following Russia’s invasion of Ukraine and to fast forward the clean energy transition.

Environmental economy activities are also expected to become more important at the global level. A recent report estimates that the global market volume for environmental technology and resource efficiency activities will increase by 7.3% per year until 2030 . The increasing opportunities for the environmental economy, particularly for economic sectors that contribute to achieving net-zero emissions, are also highlighted in the International Energy Agency reports 'World energy outlook 2022' and 'Energy technology perspectives 2023' .

Figure 2. Gross value added of the environmental goods and services sector by EU Member States, 2014 and 2020

Shares of the environmental economy in the total economy increased in 19 of the EU Member States between 2014 and 2020, with the biggest increases reported for Luxembourg and Estonia. In contrast, shares dropped during this period in four EU Member States: Croatia, Romania, Slovenia and Finland. Shares varied considerably across Member States in 2020, from about 1% in Ireland to more than 4% in Finland, Estonia, Austria and Sweden.