Macroeconomic Impacts of the EU 30% GHG Mitigation Target

Abstract

The reduction of GHG emissions is one of the most important policy objectives worldwide. Nonetheless, concrete and effective measures to reduce them are hardly implemented. One of the main reasons for this deadlock is the fear that unilateral actions will reduce a country's competitiveness, and will benefit those countries where no GHG mitigation measures are implemented. This kind of argument is also often used to explain why some governments and many business leaders are not in favour of the EU 30% GHG mitigation target that has been proposed to replace the previous 20% GHG emission reduction objective approved by the EU within the well known 20-20-20 climate and energy package. By developing and applying a recursive, dynamic, very detailed CGE model with energy generation from both fossil fuel and renewable sources, we address this issue by estimating the cost for different EU countries and industries of the EU climate and energy package under a set of alternative international scenarios on global GHG mitigation efforts. Results show that, thanks to the EU economic recession, achieving a 20% GHG emission reduction entails a moderate cost for the European Union -about 0.5% of EU GDP -even in the case of EU unilateral action. This cost could be reduced to almost zero if not only the European Union, but also the other major world economies, comply with the "low pledge" Copenhagen Accord. A 30% GHG emission reduction target would certainly be more costly: the total loss in the European Union would be 1.26% of EU GDP in the case of EU unilateral action, whereas the total cost would be 0.55% of EU GDP if all major economies reduce their own GHG emissions according to the "low pledge" Copenhagen Accord. Both border tax adjustments and free allocation of carbon permits are shown to be successful in reducing some adverse competitiveness effects of the EU GHG mitigation policy into energy intensive sectors, but at the expenses of the other economic sectors.

The Optimal Energy Mix in Power Generation and the Contribution from Natural Gas in Reducing Carbon Emissions to 2030 and Beyond

“…The Pledge+ policy induces moderately higher costs -0.6% and 0.3% for the base case and NoRET respectively. Note that upon adjusting their analysis for an economic recession, Bosello et al (2013) find a similar level of policy costs for a scenario similar to Pledge using the ICES model (another integrated assessment model developed and used at CMCC), with a policy cost of 0.5% for the EU when implementing its energy and climate policy unilaterally. Figure 11 also reviews policy costs associated with the two different approaches to implementing the same energy efficiency improvements -that being either through energy intensity improvements (HEE_I) or energy demand reductions (HEE_D).…”

“…refer to Böhringer et al (2009), Blesi et al (2010), Boeters and Koornneef (2011), Capros et al (2012) and Bosello et al (2013). However, this is the first study to specifically focus on the role of natural gas across different climate policy scenarios.…”

Measuring Germany’s Transition to a Green Economy

“…The approaches used in the IN-STREAM research project [16], by the European Commission ("I Grow Green") and [17], which are all based on compre- Due to the rationale of their construction, composite indicators such as Adjusted National Savings (ANS, [31]) and the National Welfare Index (NWI, [22])…”

Sensitivity of Modeling Results to Technological and Regional Details: The Case of Italy's Carbon Mitigation Policy

“…For instance, five recent studies suggest that for the EU27 countries to achieve a 20% emission reduction target by 2020 from the 1990 level, the carbon price can range from 19 €/tCO2 to 70 €/tCO2 (Bohringer et al, 2009;Durand-Lasserve et al, 2010;Peterson et al, 2011;Bosello et al, 2013;Orecchia and Parrado, 2013). These results indicate that there could be gross domestic product (GDP) gains of around 0.1% or losses of up to 2%.…”

“…As an example, studies examining the 20% emission reduction target by 2020 in EU27 show different levels of sophistication in representing the electrical sector and country-level details. The ICES model (Bosello et al, 2013;Orecchia and Parrado, 2013) has four electricity technologies, including hydro, solar, wind and others, whereas the models used in other studies have only one electricity sector without further technological details. Peterson et al (2011) considers EU27 as a single economic unit, while the models in other studies account for each major country separately.…”