An Empirical Investigation into Greenhouse Gas Emissions and Agricultural Economic Performance in Baltic Countries: A Non-Linear Framework

Abstract

The EU’s Common Agricultural Policy has for decades been geared towards sustainable agricultural development, not only to ensure a fair income for farmers but also to tackle climate change and environmental degradation, emphasizing the link between agricultural economic activity and the importance of greenhouse gas (GHG) emissions. The importance of research in this area is reinforced by the EU’s ever-increasing sustainability ambitions in recent years, as set out in the European Green Deal, which has found a place in the new 2023–2027 Common Agricultural Policy (CAP) policy to meet the EU’s 2050 target to achieve climate neutrality. The aim of this study is to assess the relationship between greenhouse gas emissions and economic performance for the agricultural sector in the Baltic States (Lithuania, Latvia, and Estonia) from 1998 to 2019. These three countries have similar agricultural structures and similar natural conditions, so the research provides comparable results. The relationship was analyzed by using the nonlinear autoregressive distributed lag (NARDL) model that allows the estimation of short-term dynamics using a distributed delay component and long-term dynamics using a single cointegrating vector. The analysis of the research data showed that gross value-added changes influence greenhouse gas emissions in all three countries. The results of the research, on the other hand, suggested that there is evidence supporting the reverse ‘U-shaped’ impact of the environmental Kuznets curve (ECK) when assessing data from Lithuania and Estonia, but not from Latvia. The study’s findings have significant policy consequences.