Is Fuel-Switching a No-Regrets Environmental Policy? VAR Evidence on Carbon Dioxide Emissions, Energy Consumption and Economic Performance in Portugal

The objective of this paper is to estimate the impact of carbon dioxide emissions from fossil fuel combustion activities on economic activity in Portugal in order to evaluate the economic costs of policies designed to reduce carbon dioxide emissions. We find that energy consumption has a significant impact on macroeconomic activity. In fact, a one ton of oil equivalent permanent reduction in aggregate energy consumption reduces output by €6,340 over the long term, an aggregate impact which hides a wide diversity of effects for different fuel types. More importantly, and since carbon dioxide emissions are linearly related to the amounts of fuel consumed, our results allow us to estimate the costs of reductions in carbon dioxide emissions from different energy sources. We estimate that marginal abatement costs for carbon dioxide are €45.62 per ton of carbon dioxide per year for coal, €66.52 for oil, €91.07 for gas, €191.13 for electricity and €254.23 for biomass. An important policy implication is that, once the overall economic costs of reducing carbon dioxide emissions are considered, fuel switching is a no-regrets environmental policy capable of reducing carbon dioxide emissions without jeopardizing economic activity and indeed with the potential for generating favorable economic outcomes

On the Effects of Infrastructure Investments on the Regional Economic Mix in Portugal

In this paper, we deal with the issue of the effects of infrastructure investments on the regional mix of economic activity in Portugal. To address this issue we use a new data set for infrastructure investments in Portugal at the level of the NUTS II. We use a region-specific VAR approach, which considers, for each region, not only the effects of infrastructure investments in the region itself but also the regional spillover effects for each region from infrastructure investments elsewhere. Our results can be summarized as follows. First, we find that the largest aggregate effects are for investments in municipal roads, airports, ports, and education. Second, regional spillovers are very important across the board, and are particularly relevant for municipal roads and highways. Third, we find that for road transportation infrastructures, investments in national roads shift the regional concentration of economic activity towards North, Lisbon, and Alentejo, while investments in municipal roads have the same effects for Centre and investments in highways once again in North, Lisbon and Alentejo. For other transportation infrastructures the shifts in regional economic composition occur in North and Alentejo for railroad investments, Lisbon, Alentejo, and Algarve for airport investment, and Centre and Algarve for port infrastructure investments. Finally, investments in both education and health shift the regional output mix towards North and Centre, and in the case of health Alentejo as well. Accordingly, the aggregate effects of infrastructure investments hides a wide variety of effects across regions and across different infrastructure assets. Being mindful of these differences is fundamental in designing policies that help with aggregate economic performance without increasing regional disparities

Social Spending and Long-term Economic Performance in the US

In this paper, we study the effects of social spending on long-term economic performance in the USA from 1949 to 2019 using vector auto-regressive models. We break down social spending into six programs to identify the economic effects of different social programs. Overall, social spending has a positive impact on private saving but an adverse effect on the unemployment rate. Due to its dominant distortionary impact on the labor market, social spending decreases GDP. However, these effects are minimal and are primarily short-term. The economic implications of the different social spending programs on the economy are similar but different in magnitude. The impact of social security and medical care spending on GDP is not significant. In turn, the adverse effects of veteran benefits and unemployment insurance on GDP are dominated by the short-term impact. In contrast, the effects of public assistance are more evenly distributed, and the adverse effects of other social assistance are exclusively long-term. Overall, the message is that although social spending adversely affects economic performance, these effects are small and primarily short-term. As such, the quest for increased social protection and improved social welfare does not seem to come at a significant economic cost. This attests to the sustainability of such policies

On the potential economic costs of cutting carbon dioxide emissions in Portugal

The objective of this paper is to estimate the impact of reducing carbon dioxide emissions from fossil fuel combustion activities on economic activity in Portugal. We find that energy consumption has a significant impact on macroeconomic activity. In fact, a 1 ton of oil equivalent permanent reduction in aggregate energy consumption reduces output in the long term by €6,340. More importantly, and since carbon dioxide emissions are linearly related to the amounts of fuel consumed, our results allow us to estimate the costs of reductions in carbon dioxide emissions. We estimate that a uniform standard for reducing carbon dioxide emissions from fossil fuel combustion activities would lead to a marginal abatement cost of €95.74 per ton of carbon dioxide. This is a first rough estimate of the potential economic costs of policies designed to reduce carbon dioxide emissions. At this level one may conclude that uniform, across the board reductions in carbon emissions would have a clear negative effect on economic activity. Hence, at the aggregate level there is clear evidence for a trade-off between economic performance and a reduction in carbon emissions. This opens the door to the investigation of the scope for policy to minimize the costs of environmental policy and regulation.info:eu-repo/semantics/publishedVersio

Is fuel-switching a no-regrets environmental policy? VAR evidence on carbon dioxide emissions, energy consumption and economic performance in Portugal

The objective of this paper is to estimate the impact of carbon dioxide emissions from fossil fuel combustion activities on economic activity in Portugal in order to evaluate the economic costs of policies designed to reduce carbon dioxide emissions. We find that energy consumption has a significant impact on macroeconomic activity. In fact, a one ton of oil equivalent permanent reduction in aggregate energy consumption reduces output by [euro]6340 over the long term, an aggregate impact which hides a wide diversity of effects for different fuel types. More importantly, and since carbon dioxide emissions are linearly related to the amounts of fuel consumed, our results allow us to estimate the costs of reductions in carbon dioxide emissions from different energy sources. We estimate that marginal abatement costs for carbon dioxide are [euro]45.62 per ton of carbon dioxide per year for coal, [euro]66.52 for oil, [euro]91.07 for gas, [euro]191.13 for electricity and [euro]254.23 for biomass. An important policy implication is that, once the overall economic costs of reducing carbon dioxide emissions are considered, fuel switching is a no-regrets environmental policy capable of reducing carbon dioxide emissions without jeopardizing economic activity and indeed with the potential for generating favorable economic outcomes.Carbon dioxide emissions Energy and the economy Environmental policy Fuel-switching Vector autoregressive model

A dynamic general equilibrium analysis of energy prices, CO2 taxes and environmental fiscal reform in Portugal

Tese de Doutoramento, Ciências Económicas e Empresariais no domínio de Economia, Faculdade de Economia, Universidade do Algarve, 2011O crescimento económico, as finanças públicas e as alterações climáticas são áreas de política económica que têm vindo a receber uma atenção significativa na última década. Em particular, o sector público tem tipicamente tido como desafio central o desenvolvimento de políticas equilibradas para promover o crescimento económico e a sustentabilidade das finanças públicas. Este estudo visa responder a algumas das principais questões de política económica que o sector público enfrenta em Portugal, à semelhança de outras pequenas economias abertas, importadoras de energia, particularmente no contexto da União Europeia (UE). Especificamente, este estudo avalia o potencial da política fiscal para estimular o crescimento económico, promover a sustentabilidade das finanças públicas, e reduzir as emissões de gases com efeito de estufa. Devido à importância do consumo de energia para o crescimento económico, políticas que possam ter um impacto negativo no consumo de energia esbatem-se contra as preocupações económicas e orçamentais. Isto é particularmente importante no que diz respeito à política ambiental na área das alterações climáticas. A política climática e energética pode, contudo, fornecer um estímulo, e ser uma ferramenta importante, para dar resposta às diversas questões de política com que o sector público se debate. De facto, as actuais dificuldades orçamentais que o país enfrenta exigem respostas novas e inovadoras

Is Fuel-Switching a No-Regrets Environmental Policy? VAR Evidence on Carbon Dioxide Emissions, Energy Consumption and Economic Performance in Portugal

The objective of this paper is to estimate the impact of carbon dioxide emissions from fossil fuel combustion activities on economic activity in Portugal in order to evaluate the economic costs of policies designed to reduce carbon dioxide emissions. We find that energy consumption has a significant impact on macroeconomic activity. In fact, a one ton of oil equivalent permanent reduction in aggregate energy consumption reduces output by €6,340 over the long term, an aggregate impact which hides a wide diversity of effects for different fuel types. More importantly, and since carbon dioxide emissions are linearly related to the amounts of fuel consumed, our results allow us to estimate the costs of reductions in carbon dioxide emissions from different energy sources. We estimate that marginal abatement costs for carbon dioxide are €45.62 per ton of carbon dioxide per year for coal, €66.52 for oil, €91.07 for gas, €191.13 for electricity and €254.23 for biomass. An important policy implication is that, once the overall economic costs of reducing carbon dioxide emissions are considered, fuel switching is a no-regrets environmental policy capable of reducing carbon dioxide emissions without jeopardizing economic activity and indeed with the potential for generating favorable economic outcomes.carbon dioxide emissions, energy and the economy, environmental policy, fuel-switching, vector autoregressive model

On the Potential Economic Costs of Cutting Carbon Dioxide Emissions in Portugal

The objective of this paper is to estimate the impact of reducing carbon dioxide emissions from fossil fuel combustion activities on economic activity in Portugal. We find that energy consumption has a significant impact on macroeconomic activity. In fact, a one ton of oil equivalent permanent reduction in aggregate energy consumption reduces output in the long term by €6,340. More importantly, and since carbon dioxide emissions are linearly related to the amounts of fuel consumed, our results allow us to estimate the costs of reductions in carbon dioxide emissions. We estimate that a uniform standard for reducing carbon dioxide emissions from fossil fuel combustion activities would lead to a marginal abatement cost of €95.74 per ton of carbon dioxide. This is a first rough estimate of the potential economic costs of policies designed to reduce carbon dioxide emissions. At this level one may conclude that uniform, across the board reductions in carbon emissions would have a clear negative effect on economic activity. Hence, at the aggregate level there is clear evidence for a trade-off between economic performance and a reduction in carbon emissions. This opens the door to the investigation of the scope for policy to minimize the costs of environmental policy and regulation.carbon dioxide emissions, energy and the economy, environmental policy, vector autoregressive model