Decarbonization of EU Services Sector: Shadow Carbon Prices Approach in Energy Efficiency Analysis

The transition to a climate-neutral economy positions energy efficiency as a cornerstone of the European Union's (EU) strategy.While significant attention has been paid to the industrial and residential sectors, the service sector has emerged as a critical area due to its rapid growth and increasing energy demand.This paper addresses the urgent need for effective methods to monitor and improve energy efficiency within this complex sector.The primary objective is to provide a comprehensive review of the existing literature on tracking energy efficiency in the EU service sector and to highlight the potential of the shadow carbon price (SCP) approach as an advanced analytical tool for policy analysis.This paper synthesises findings from recent studies and policy documents, examining the theoretical foundations of the SCP approach based on non-parametric techniques like Data Envelopment Analysis (DEA) to assess the marginal cost of CO 2 abatement.The main findings from the literature indicate that while the EU has a robust policy framework, including the Effort Sharing Regulation (ESR) and the new Emissions Trading System (ETS2), there are significant disparities in energy efficiency performance across EU member states.The originality of this paper lies in its focused application of the SCP concept to the underresearched tertiary sector, proposing it as a vital tool for evaluating policy effectiveness and guiding the EU's transition to a low-carbon service economy by providing a more nuanced understanding of the economic trade-offs involved in reducing environmental impact of energy consumption in the service sector.