The European Union was built to remove barriers. But integration should not mean uniformity. A recent study from Poland shows why applying the same EU policy instruments across very different national conditions can come at a significant cost.
Harmonisation can be valuable. Common standards and predictable cross-border rules have helped create the Single Market and allowed firms to operate beyond national borders. But that does not mean every policy should be designed and implemented in the same way across 27 very different countries.
Subsidiarity may work better in some areas, mutual recognition may be sufficient in others, while regulatory competition can allow countries to test different approaches and learn from each other.
This matters because harmonisation has costs too, especially when common rules ignore differences in economic structures, consumer behaviour or institutional capacity.
A recent study by Katarzyna Byszek-Stevens and Barbara Więckowska from the Warsaw School of Economics offers a useful Polish stress test of this problem. Their paper, Do Harmonised EU Rules Preserve Economic Coherence?, compares two very different areas of EU policy: the Emissions Trading System and the Tobacco Products Directive.
Poland is a useful case because its exposure is high in both areas. Its electricity system remains more carbon-intensive than in many EU countries, while industry accounts for a relatively large share of the economy. At the same time, smoking prevalence remains high, and tobacco-related industries have a stronger economic footprint than in many other Member States.
A common carbon price in the ETS applies across economies with radically different energy mixes. In Poland, the interaction between a uniform carbon-price path, a carbon-intensive power system and energy-intensive industry creates greater economic exposure.
Under the authors’ baseline scenario, the model-implied effect in 2030 is €4.79 billion lower GDP, around 70,000 fewer jobs and €0.85 billion less investment. The authors also show that these costs could be much lower if the system better reflected Poland’s specific economic and energy conditions.
Beyond the study itself, such costs can also have political consequences. If climate policies are perceived as imposing disproportionate burdens, they can strengthen anti-EU forces in Poland and elsewhere. Over time, that can undermine support not only for particular climate measures, but for the ETS itself.
The authors also examine the future of the Tobacco Products Directive. Here the differences are not only between countries but also between products. If future rules increasingly equalise the treatment of combustible cigarettes and other nicotine products despite different risk profiles, they may weaken incentives for smokers to switch away from cigarettes.
In the study’s restrictive TPD scenario, the authors assume greater relocation of production outside the EU and an expansion of illicit markets. The modelled economic effect by 2030 is €10 billion lower GDP and almost 140,000 fewer jobs in Poland. The authors do not estimate the fiscal consequences, but changes of this kind would likely reduce public revenues.
The public-health result is also important. In the model, the restrictive scenario does not produce a better smoking-prevalence trajectory. By 2030, smoking prevalence is six percentage points higher than under the product-differentiated scenario.
This debate should therefore not be framed as
“harmonisation versus no harmonisation”.
The better question is what should be harmonised, and at what level. Luis Garicano, Bengt Holmström and Nicolas Petit put it well in The Constitution of Innovation:
“Variation is a strength. What works for five countries may not work for twenty-seven.”
Their broader argument is that Europe benefited historically from political diversity and competition between jurisdictions. Uniformity can reduce that space for experimentation.
Mutual recognition offers another path. Instead of harmonising every national rule, the EU can make it easier for products and services legally accepted in one Member State to circulate across the Single Market, while leaving room for different national approaches.
That does not mean abandoning integration. Europe still suffers from excessive fragmentation, legal complexity and national barriers that prevent firms from scaling across borders. Harmonisation is valuable when it removes those barriers. But it can also generate costs. If centralisation ignores local conditions or suppresses useful regulatory experimentation, the costs may outweigh the benefits.
This has several clear policy implications. The Polish study suggests that EU institutions should distinguish more carefully between harmonising objectives and harmonising instruments. Common goals can often coexist with differentiated implementation.
Subsidiarity should also become a genuine policy test. Member States should quantify and communicate national effects much earlier in the legislative process. Poland, in particular, should be more assertive in showing how common rules interact with its economic structure.
Impact assessments should also take territorial differences, competitiveness and unintended consequences much more seriously.
The Single Market needs fewer barriers and simpler rules. It does not require every country to regulate everything in exactly the same way. Europe should harmonise where it clearly adds value and hold back where uniformity costs more than it delivers.
