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 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

Evaluation of post Kyoto GHG emission reduction paths

Climate change has become a critical issue in the international policy making agenda. At the UNFCC conference in Bali 2007, countries decided on a roadmap to achieve a ‘secure climate future’. Given the commitment to limit the temperature increase to 2° Celsius relative to the preindustrial levels, the EU decided in March 2007, as a first step, a 20% reduction of its GHG emissions by 2020, going to 30% if a comprehensive international agreement can be reached. This study uses the multi-sector multi-region world model GEM-E3 in order to identify the world economic implications of different participation schemes for post Kyoto. The scenarios reported in this paper have contributed to the EU communication on ‘Limiting Global Change to 2° Celsius the way ahead to 2020 and beyond’.Climate change; Computable general equilibrium modeling; Emission reduction;

Impacts of energy taxation in the enlarged European Union, evaluation with GEM-E3 Europe

The objective of this study is twofold: first to analyze how the implementation of the EU energy tax policies will affect the EU and its Member States and secondly to analyze how energy tax policies can contribute to climate policy objectives in the enlarged EU