Assessing economic–environmental decoupling in the EU using sectoral Kaya decomposition

The European Green Deal aims to make Europe the first climate-neutral continent by 2050; however, progress remains uneven across economic sectors. While the energy sector demonstrates significant decarbonization, the transport and industry sectors face structural rigidities that hinder aggregate progress. This study examines the sectoral decomposition of CO₂ emissions in the EU-27 from 1990 to 2022 to identify the specific drivers of these disparities. We employed the Kaya Identity decomposition method, combined with the Log-Mean Divisia Index (LMDI), to isolate the contributions of population, affluence, energy intensity, and carbon intensity to changes in emissions. Findings indicate that the energy sector achieved the most significant reduction in energy intensity (-34.6 %), primarily driven by fuel switching and the transition to renewable energy. Conversely, the transport sector exhibited a structural "rebound effect," where demand growth consistently outpaced efficiency gains, leading to a net increase in emissions. The decomposition analysis confirms that while technological improvements are visible, they are insufficient to offset the "scale effect" of economic activity in hard-to-abate sectors. Achieving the 2030 targets requires moving beyond aggregate goals to sector-specific industrial strategies, particularly for the transport and heavy industry sectors.