Simulating the deep decarbonisation of residential heating for limiting global warming to 1.5C

Whole-economy scenarios for limiting global warming to 1.5C suggest that direct carbon emissions in the buildings sector should decrease to almost zero by 2050, but leave unanswered the question how this could be achieved by real-world policies. We take a modelling-based approach for simulating which policy measures could induce an almost-complete decarbonisation of residential heating, the by far largest source of direct emissions in residential buildings. Under which assumptions is it possible, and how long would it take? Policy effectiveness highly depends on behavioural decision- making by households, especially in a context of deep decarbonisation and rapid transformation. We therefore use the non-equilibrium bottom-up model FTT:Heat to simulate policies for a transition towards low-carbon heating in a context of inertia and bounded rationality, focusing on the uptake of heating technologies. Results indicate that the near-zero decarbonisation is achievable by 2050, but requires substantial policy efforts. Policy mixes are projected to be more effective and robust for driving the market of efficient low-carbon technologies, compared to the reliance on a carbon tax as the only policy instrument. In combination with subsidies for renewables, near-complete decarbonisation could be achieved with a residential carbon tax of 50-200Euro/tCO2. The policy-induced technology transition would increase average heating costs faced by households initially, but could also lead to cost reductions in most world regions in the medium term. Model projections illustrate the uncertainty that is attached to household behaviour for prematurely replacing heating systems

Trade sustainability impact assessment (SIA) on the comprehensive economic and trade agreement (CETA) between the EU and Canada: Final report

Commissioned by the European Commission, the Final Report for the EU-Canada Sustainability Impact Assessment (SIA) on the EU-Canada Comprehensive Economic and Trade Agreement (CETA) provides a comprehensive assessment of the potential impacts of trade liberalisation under CETA. The analysis assesses the economic, social and environmental impacts in Canada and the European Union in three main sectors, sixteen sub-sectors and across seven cross-cutting issues. It predicts a number of macro-economic and sector-specific impacts. The macro analysis suggests the EU may see increases in real GDP of 0.02-0.03% in the long-term from CETA, whereas Canada may see increases of 0.18-0.36%. The Investment section of the report suggests these numbers could be higher when factoring in investment increases. At the sectoral level, the study predicts the greatest gains in output and trade to be stimulated by services liberalisation and by the removal of tariffs applied on sensitive agricultural products. It also suggests CETA could have a positive social impact if it includes provisions on the ILO’s Core Labour Standards and Decent Work Agenda. The study also details a variety of impacts in various “cross-cutting” components of CETA. It finds CETA would stimulate investment in Canada, and to a lesser extent in the EU; and finds costs outweigh the benefits of including controversial NAFTA-style investor-state dispute settlement (ISDS) provisions in CETA. It predicts potentially imbalanced benefits from a government procurement (GP) chapter. The study assumes CETA will lead to an upward harmonisation in intellectual property rights (IPR) regulations, particularly in Canada, which will have a number of effects. It predicts some notable impacts in terms of competition policy, as well as trade facilitation, free circulation of goods and labour mobility.EU-Canada Sustainability Impact Assessment; SIA; EU-Canada Comprehensive Economic and Trade Agreement; Comprehensive Economic and Trade Agreement; CETA; government procurement; investor-state provisions; ISDS; competition policy; Dan Prud'homme; trade impact assessment

Macroeconomic assessment of possible Green Recovery scenarios in Visegrad countries

The article discusses how and why Green Recovery could be beneficial for the Visegrad countries based on a modelling exercise using the E3ME macroeconometric model. Green Recovery is defined as including policies in recovery plans that not only target economic recovery, but also contribute to environmental targets. The paper proposes that a Green Recovery could be valuable and suitable for the region contributing to both restoring employment and boosting economic activity as well as reaching climate goals. This is tested through a macroeconomic simulation, using the E3ME model. E3ME is built on PostKeynesian economic theory and on econometric estimations of macroeconomic relationships. The results of the analysis focus on three dimensions: (1) social – employment, (2) environmental – level of CO2 emissions and (3) economic activity – gross domestic product (GDP). Outcomes indicate that a green recovery can shorten the time needed for employment and economic recovery as well as contributes to CO2 emission reductions. In Hungary, Czechia and Poland, the impact persists into the long-term; however, the paper also concludes that countries with high reliance on coal (e.g. Poland) could return to coal in the long term if no further policies are introduced

EU climate and energy policy beyond 2020: are additional targets and instruments for renewables economically reasonable?

The European Council has proposed to stick to a more ambitious GHG target but to scrap a binding RES target for the post-2020 period. This is in line with many existing assessments which demonstrate that additional RES policies impair the cost-effectiveness of addressing a single CO2 externality, and should therefore be abolished. Our analysis explores to what extent this reasoning holds in a secondbest setting with multiple externalities related to fossil and nuclear power generation and policy constraints. In this context, an additional RES policy may help to address externalities for which firstbest policy responses are not available. We use a fully integrated combination of two separate models the top-down, global macro-economic model E3MG and the bottom-up, global electricity sector model FTT:Power – to test this hypothesis. Our quantitative analysis confirms that pursuing an ambitious RES target may mitigate nuclear risks and at least partly also negative non-carbon externalities associated with the production, import and use of fossil fuels. In addition, we demonstrate that an additional RES target does not necessarily impair GDP and other macro-economic measures if rigid assumptions of purely rational behaviour of market participants and perfect market clearing are relaxed. Overall, our analysis thus demonstrates that RES policies implemented in addition to GHG policies are not per se welfare decreasing. There are plausible settings in which an additional RES policy may outperform a single GHG/ETS strategy. Due to the fact, however, that i) policies may have a multiplicity of impacts, ii) the size of these impacts is subject to uncertainties and iii) their valuation is contingent on individual preferences, an unambiguous, “objective” economic assessment is impossible. Thus, the eventual decision on the optimal choice and design of climate and energy policies can only be taken politically

The momentum of the solar energy transition

Decarbonisation plans across the globe require zero-carbon energy sources to be widely deployed by 2050 or 2060. Solar energy is the most widely available energy resource on Earth, and its economic attractiveness is improving fast in a cycle of increasing investments. Here we use data-driven conditional technology and economic forecasting modelling to establish which zero carbon power sources could become dominant worldwide. We find that, due to technological trajectories set in motion by past policy, a global irreversible solar tipping point may have passed where solar energy gradually comes to dominate global electricity markets, without any further climate policies. Uncertainties arise, however, over grid stability in a renewables-dominated power system, the availability of sufficient finance in underdeveloped economies, the capacity of supply chains and political resistance from regions that lose employment. Policies resolving these barriers may be more effective than price instruments to accelerate the transition to clean energy

Mainstreaming the Water-Energy-Food Nexus through nationally determined contributions (NDCs): the case of Brazil

The Water-Energy-Food Nexus approach to the governance of natural resources seeks to identify and address the synergies and trade-offs amongst traditionally separated sectors, to capture significant feedbacks that have so far remained insufficiently understood and regulated. One key specificity of the Nexus approach is the need for intersectoral, cross-scale and stakeholder integration, which is particularly challenging due to the lack of policy coordination prevailing in many countries. Yet, some emerging integrated policy processes, such as those aimed at implementing nationally determined contributions (NDCs) under the 2015 Paris Agreement, may offer a sufficient level of integration to mainstream the Nexus approach. This article focuses on the potential of such NDC processes in Brazil. NDC processes in China, the European Union, India and Mexico are used as indicators associated with higher or lower degrees of integration for a more specific analysis of the case of Brazil. The article concludes that the barriers to sectoral integration raised by the dominant position of the agricultural sector in Brazil as regards, among other things, environmental legislation, are unlikely to be overcome by internal action. This represents a threat to achieving the target of zero deforestation in Brazil, considering the cropland-livestock forestry feedbacks involved in the growing demand for agricultural commodities from China. NDCs already provide space for international cooperation, which could be further developed to include measures for linking demand for agricultural commodities from the EU and China, and massive land-use change and deforestation in Brazil

Socio-macroeconomic impacts of implementing different post-Brexit UK energy reduction targets to 2030

For the period since 2011, the UK has been bound by European Union (EU) legislation regarding energy reduction targets to 2020. As of 2019, the UK had reduced its final energy use by 18% against a baseline projection to 2020, on track to meet its target of 18%. Whilst the rest of the EU-27 now set their own energy reduction targets to 2030, upon leaving the EU via Brexit, the UK is now free to choose its own energy targets. But what should the energy target be for 2030, and what are the socio-macroeconomic impacts and policy implications? To address this, we use two econometric energy-economy models to assess three different levels of energy reduction target, with 27%, 33% and 40% reduction in 2030 versus the baseline model projections. We find the strictest (40%) energy reduction target could deliver the largest economic and employment benefits. However, careful attention to policies are required, to ensure improvements to overall economy-wide energy efficiency whilst minimising rebound. Demand-side policies of serious scale within an ‘avoid-shift-improve’ framework are required, including massive building retrofits, significant improvements to industrial energy efficiency, switching to low energy transport modes, and moving away from meat-based diets

Environmental impact assessment for climate change policy with the simulation-based integrated assessment model E3ME-FTT-GENIE

A high degree of consensus exists in the climate sciences over the role that human interference with the atmosphere is playing in changing the climate. Following the Paris Agreement, a similar consensus exists in the policy community over the urgency of policy solutions to the climate problem. The context for climate policy is thus moving from agenda setting, which has now been mostly established, to impact assessment, in which we identify policy pathways to implement the Paris Agreement. Most integrated assessment models currently used to address the economic and technical feasibility of avoiding climate change are based on engineering perspectives with a normative systems optimisation philosophy, suitable for agenda setting, but unsuitable to assess the socio-economic impacts of a realistic baskets of climate policies. Here, we introduce a fully descriptive, simulation-based integrated assessment model designed specifically to assess policies, formed by the combination of (1) a highly disaggregated macro-econometric simulation of the global economy based on time series regressions (E3ME), (2) a family of bottom-up evolutionary simulations of technology diffusion based on cross-sectional discrete choice models (FTT), and (3) a carbon cycle and atmosphere circulation model of intermediate complexity (GENIE-1). We use this combined model to create a detailed global and sectoral policy map and scenario that sets the economy on a pathway that achieves the goals of the Paris Agreement with >66% probability of not exceeding 2°C of global warming. We propose a blueprint for a new role for integrated assessment models in this upcoming policy assessment context.All authors acknowledge C-EERNG and Cambridge Econometrics for general academic and technical support. JFM, HP, PS, JV, NRE and PH acknowledge funding from the UK's research councils: JFM acknowledges funding from the Engineering and Physical Sciences Research Council (EPSRC), fellowship no. EP/K007254/1; JFM, PS and JV acknowledge funding from two Newton Fund grants, no EP/N002504/1 (EPSRC) and ES/N013174/1 (Economic and Social Research Council, ESRC). NRE and PH acknowledge funding from the Natural Environment Research Council (NERC) grant no NE/P015093/1. Additionally, PS acknowledges funding from Conicyt. JFM and HP acknowledge funding from The European Commission's Horizon 2020 Sim4Nexus grant, and from DG ENERGY, and AL acknowledges a postdoctoral fellowship from the University of Macau

Trade sustainability impact assessment (SIA) on the comprehensive economic and trade agreement (CETA) between the EU and Canada: Final report

Commissioned by the European Commission, the Final Report for the EU-Canada Sustainability Impact Assessment (SIA) on the EU-Canada Comprehensive Economic and Trade Agreement (CETA) provides a comprehensive assessment of the potential impacts of trade liberalisation under CETA. The analysis assesses the economic, social and environmental impacts in Canada and the European Union in three main sectors, sixteen sub-sectors and across seven cross-cutting issues. It predicts a number of macro-economic and sector-specific impacts. The macro analysis suggests the EU may see increases in real GDP of 0.02-0.03% in the long-term from CETA, whereas Canada may see increases of 0.18-0.36%. The Investment section of the report suggests these numbers could be higher when factoring in investment increases. At the sectoral level, the study predicts the greatest gains in output and trade to be stimulated by services liberalisation and by the removal of tariffs applied on sensitive agricultural products. It also suggests CETA could have a positive social impact if it includes provisions on the ILO’s Core Labour Standards and Decent Work Agenda. The study also details a variety of impacts in various “cross-cutting” components of CETA. It finds CETA would stimulate investment in Canada, and to a lesser extent in the EU; and finds costs outweigh the benefits of including controversial NAFTA-style investor-state dispute settlement (ISDS) provisions in CETA. It predicts potentially imbalanced benefits from a government procurement (GP) chapter. The study assumes CETA will lead to an upward harmonisation in intellectual property rights (IPR) regulations, particularly in Canada, which will have a number of effects. It predicts some notable impacts in terms of competition policy, as well as trade facilitation, free circulation of goods and labour mobility