Green Transition and Industrial Productivity: Energy and Environmental Intensities as Structural Constraints in the European Union

ABSTRACT Amid an accelerated energy transition and growing regulatory and competitive pressures, this study analyses how energy and environmental constraints condition industrial productivity in the EU‐27 (2014–2024) and what role innovation plays in this process. It pursues two objectives: (i) to identify whether energy and emissions intensities constitute necessary conditions for high productivity; and (ii) to assess whether business innovation effort moderates their relationship with productivity and whether this effect is homogeneous across European economies. The analysis combines Necessary Condition Analysis, which identifies structural thresholds, with bias‐corrected dynamic fixed‐effects panel models, which allow productivity persistence and interaction effects to be analysed. Results show that energy and environmental pressures operate not as transitory costs but as structural constraints on industrial performance. From an economic policy perspective, this implies that the green transition requires considering energy and environmental constraints jointly with business innovation effort, taking into account structural differences across European economies.