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Climate-related policies in the Eurosystem/ECB staff macroeconomic projections for the euro area and the macroeconomic impact of green fiscal measures

Author

Listed:
  • Ferdinandusse, Marien
  • Kuik, Friderike
  • Lis, Eliza
  • Sun, Yiqiao

Abstract

In line with the ECB’s comprehensive action plan to incorporate climate change considerations into its policy framework, technical assumptions on carbon pricing have been introduced in the Eurosystem/ECB staff macroeconomic projections, along with a regular evaluation of the impact of climate-related fiscal policies on the projections baseline. This box evaluates the impact of green fiscal measures on GDP growth and inflation and discusses potential effects and risks to the outlook posed by the EU Emissions Trading System (ETS) and non-fiscal climate-related measures. The overall impact of green measures on euro area real GDP growth is expected to be very small until 2025, and their impact on inflation is limited but increases slightly over time. Over the period 2022-25, fiscal measures that are detrimental to the green transition outweigh green measures. Changes to the EU ETS under the “Fit for 55” package, and the sustained shift towards renewable energy sources implied by regulation, could pose both upside and downside risks to the inflation outlook, especially from 2025 onwards. JEL Classification: Q58, O44, E32

Suggested Citation

  • Ferdinandusse, Marien & Kuik, Friderike & Lis, Eliza & Sun, Yiqiao, 2023. "Climate-related policies in the Eurosystem/ECB staff macroeconomic projections for the euro area and the macroeconomic impact of green fiscal measures," Economic Bulletin Boxes, European Central Bank, vol. 1.
    • Handle: RePEc:ecb:ecbbox:2023:0001:5
    Note: 673741
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    File URL: https://www.ecb.europa.eu//pub/economic-bulletin/focus/2023/html/ecb.ebbox202301_05~d8e33ee7ac.en.html
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    Cited by:

    1. Ferdinandusse, Marien & Kuik, Friderike & Priftis, Romanos, 2024. "Assessing the macroeconomic effects of climate change transition policies," Economic Bulletin Boxes, European Central Bank, vol. 1.

    More about this item

    Keywords

    Climate change policies; GDP growth; relative prices;
    All these keywords.

    JEL classification:

    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
    • O44 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Environment and Growth
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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