FEMISE is proud to launch its latest series of policy briefs, stemming from insightful conference papers presented at the FEMISE annual conference. These briefs are rooted in scientific research and offer actionable political recommendations to address critical challenges in the Euro-Mediterranean region.

The objective if this new series of Policy Briefs is to provide policy makers, international organisers, researchers and stakeholders in the EU-Med region with research-based policy recommendations that: advocate a better EU-Med integration;  promote mobilization of investments towards green transition and sustainable economies; empower young people through innovation and entrepreneurship advocacy; and facilitate a better and more equal integration of youth and women, aiming to create pathways for decent employment.

These Policy Briefs aspire to drive impactful dialogue and action across the EU-Med region.

Context

As global value chains increasingly incorporate environmental and sustainability standards, firms face growing pressure to comply with energy efficiency requirements and climate-related regulations. In the Euro-Mediterranean region, this challenge is particularly acute. While the European Union has advanced regulatory frameworks and enforcement mechanisms supporting the green transition, many Southern and Eastern Mediterranean countries continue to face gaps in implementation capacity, access to green finance, and technological upgrading.

At the same time, environmental regulation is often perceived as a constraint on competitiveness, especially for firms in energy-intensive sectors. This policy brief challenges that assumption by examining whether—and under what conditions—energy-related regulations and green practices can enhance firms’ ability to integrate into GVCs. Understanding this relationship is crucial for policymakers seeking to align trade, industrial, and climate objectives while ensuring that the green transition supports inclusive economic development across the Euro-Mediterranean region.

Summary

This policy brief analyses the relationship between energy-related environmental regulations, firms’ adoption of green practices, and participation in Global Value Chains in the Euro-Mediterranean region. Drawing on data from nearly 17,000 firms across 23 countries, the study shows that well-enforced energy regulations and the adoption of energy management practices significantly increase both the likelihood and intensity of firms’ GVC participation—particularly for firms that are weakly integrated into global markets.

The findings reveal notable differences across regions and sectors. While both EU and Southern and Eastern Mediterranean (SEMED) firms benefit from environmental regulations, the effects are stronger for EU firms due to more robust enforcement frameworks. Energy management practices—such as monitoring, auditing, and setting targets for energy consumption—emerge as more effective than incremental energy innovation in supporting GVC integration. The brief also highlights that firms in energy-intensive sectors rely more heavily on regulatory incentives, while firms in energy-efficient sectors benefit more from proactive green practices.

Based on these results, the policy brief underscores the importance of incentive-based environmental regulation, stronger enforcement mechanisms, improved access to green finance, and enhanced regional policy coordination. It calls for better alignment between trade, industrial, and environmental policies, alongside targeted support to help Southern and Eastern Mediterranean firms upgrade energy efficiency, meet international standards, and move into higher value-added segments of global value chains.

Read the full Policy Brief no.10 here

This Policy Brief is part of the FEMISE Policy Brief Series and is based on the FEMISE Conference Paper no.13. entitled: «Exploring The Role of Environmental Regulations and Green Practices in Global Value Chains (Gvcs) Participation: Evidence from Firms in The Euro-Mediterranean Region» with the same authors.

The opinions and contents of this document are the sole responsibility of the authors and can under no circumstances be regarded as reflecting the position of FEMISE, IEMED, ERF or the AECID