Climate change policy in european countries and its effects on industry.

Climate; Country; Effects; Industries; Industry; Policy; Working;

Climate change policy in European countries and its effects on industry

In this paper we discuss the effects of different climate change policies on industrial activity. We compare the effects of carbon taxes, grandfathered permits, technology standards and voluntary agreements. We survey first the insights from economic theory and from model experiments for the US. Next we use a general equilibrium model, to assess the effect of different climate change policies on industrial activity per sector and per member country in the EU. We pay particular attention to the effects of policies where EU member states exempt their energy-intensive sectors from abatement efforts. The main findings are that, in the EU, the effects on industrial activity and the welfare costs of carbon abatement policies that use tradeable permits or carbon taxes are small when no industrial sectors are exempted. When one member country exempts its energy intensive sector, this will have a small positive impact on its activity level but will generate an extra welfare cost for the EU.environmental policy; taxes; marketable permits; industry; climate change policy

Modelling the health related benefits of environmental policies - a CGE analysis for the eu countries with gem-e3

A number of recent studies on taxation in the presence of externalities in a second-best framework consider the implications of taking into account the feedback effects of environmental quality. This paper explores by means of GEM-E3, a computable general equilibrium model for the EU countries, the importance of the feedback effects of the health related benefits from an environmental policy. The modelling framework implemented in GEM-E3 allows for three channels through which the feedback can occur: a decrease in medical expenditure, an increase in the consumers' available time and an increase of labour productivity in the production sectors. The results show that the explicit modelling of the health related effect of air pollution on consumers and producers allows for a better evaluation of the impact of environmental policies on private consumption and employment. However, in terms of global effect, the impacts of the feedback are small, compared to the standard GEM-E3 model where the health related benefits are evaluated ex-post.applied general equilibrium model, non-separable externalities, CO2 tax, environment, ancillary benefits

Modelling the health related benefits of environmental policies and their feedback effects, a CGE analysis for the EU countries with GEM-E3

A number of recent studies on taxation in the presence of externalities in a second-best framework consider the implications of taking into account the feedback effects of environmental quality. This paper explores by means of GEM-E3, a computable general equilibrium model for the EU countries, the importance of the feedback effects of the health related benefits from an environmental policy. The modelling framework implemented in GEM-E3 allows for three channels through which the feedback can occur: a decrease in medical expenditure, an increase in the consumers" available time and an increase of labour productivity in the production sectors. The results show that the explicit modelling of the health related effect of air pollution on consumers and producers allows for a better evaluation of the impact of environmental policies on private consumption and employment. However, in terms of global effect, the impacts of the feedback are small, compared to the standard GEM-E3 model where the health related benefits are evaluated ex-postapplied general equilibrium model, non-separable externalities, CO2 tax, environment, ancillary benefits

Post Kyoto Options for Belgium, 2012-2050

This report examines possible post-Kyoto options for Belgium. Climate change is coming up again at the top of the policy agenda with the decision of the European Commission to reduce its GHG emissions by 20% by 2020. The analysis is done with the MARKAL/TIMES model, a partial equilibrium model for the energy system. It is a technico-economic model, which assembles in a simple but economic consistent way technological information (conversion-efficiency, investment- and variable costs, emissions, etc.) for the entire energy system. Two CO2 reduction scenarios for Belgium are analysed up to the horizon 2050, with and without the possibility of nuclear and carbon capture technologies. The scenarios analysed show that it is possible to attain very stringent CO2 reductions in Belgium. The welfare cost remains limited in the case of a -22.5% reduction in 2050 compared to 1990. The cost is 0.7% of GDP on an annual base but it can become more expensive and reaches up to 1.3% of GDP on an annual base, when the reduction is -52%. These costs are the costs within the energy system without considering any potential side benefits (reduction of other air pollutants and energy security) and assuming a CO2 tax or a permit system as policy instrument for achieving the CO2 reduction target, i.e. an efficient instrument.climate change, energy system modelling, post-Kyoto

How to achieve the Kyoto Target in Belgium, modelling methodology and some results

This paper discusses the methodology and some results to assess the means and costs of meeting the Kyoto target for Greenhouse gas emissions in Belgium. This target consists in reducing the emissions of Greenhouse gasses in 2008-2012 by 7.5% compared to the level of 1990. Here we assume that this target has to be met in Belgium and that no tradable permits or other flexible mechanisms can be used to achieve the required reduction in Belgium. This paper can therefore serve as an input into policy debates at the European level on flexible mechanisms and on coordination of Greenhouse policies. The second chapter concentrates on the methodological aspects of this study. We explain how we represent carbon emissions in the economy, what models we use, how we construct scenarios and what cost concepts are chosen. In the third chapter we present the Reference with its macro-economic and energy price assumptions. It is a detailed scenario for the future GHG emissions in Belgium that takes into account the policy measures already decided. The fourth chapter is devoted to the ‘Kyoto’ scenario. In this scenario the GHG emissions are reduced in function of their costs in order to achieve the 'Kyoto' target. The last chapter presents a few sensitivity studies.

Interaction between Local Air Pollution and Global warming Policy and its Policy Implications

In this paper we study the policy interactions between meeting a greenhouse gas emission constraint and local air pollution policies. We use a partial equilibrium model of a national energy market to address three questions. First what is the greenhouse gas emission reduction one can expect if one pursues local air pollution objectives only? Second what ancillary local air pollution benefits can be expected if the only policy goal is to reduce the emission of greenhouse gasses? Third, what are the efficiency gains if both policy goals are pursued jointly?global warming; ancillary benefits; policy design; air pollution

Is Kyoto fatally flawed? An analysis with MacGEM

In this paper we present some numerical simulations with the MacGEM model to evaluate the consequences for the Kyoto Protocol on the reduction of greenhouse gases of the recent Bonn agreement and the nonratification by the USA. MacGEM is a global marginal abatement cost model for carbon emissions from fossil fuel use. Marginal abatement cost functions are estimated on data generated with the GEM-E3-World general equilibrium model under the assumption that abatement is produced in a cost efficient way in every individual country/region of the model. Nonparticipation of the USA causes the equilibrium carbon price in Annex B countries to fall by approximately 50% since an important share of permit demand falls out and the global abatement objective is substantially eroded. With respect to the Bonn agreement, we focus on the Commitment Period Reserve (CPR) and carbon sinks. The CPR is a compliance mechanism requiring all Parties to maintain some fixed number of permits on their permit account. It entails a binding permit export ceiling for the former Soviet Union and central European countries. It raises the equilibrium carbon permit price by approximately 30% and generates substantial monopoly rents for permit exporters. Finally, carbon sinks enhancement activities are accounted for by assuming that they represent free abatement options. These activities enable Parties to fulfil their reduction commitment at lower compliance costs and cause the equilibrium permit price to decreases even further. We conclude that the Bonn agreement has indeed eroded completely the Kyoto Protocol's emission targets but that it has the merit to have saved the international climate change negotiation framework.environmental economics; climate change; permit trade; Kyoto Protocol; carbon sinks