Does climate policy make the EU economy more resilient to oil price rises? A CGE analysis
AbstractThe European Union has committed itself to reduce greenhouse gas (GHG) emissions by 20% in 2020 compared with 1990 levels. This paper investigates whether this policy has an additional benefit in terms of economic resilience by protecting the EU from the macroeconomic consequences due to an oil price rise. We use the GEM-E3 computable general equilibrium model to analyze the results of three scenarios. The first one refers to the impact of an increase in the oil price. The second scenario analyses the European climate policy and the third scenario analyses the oil price rise when the European climate policy is implemented. Unilateral EU climate policy imposes a cost on the EU of around 1.0% of GDP. An oil price rise in the presence of EU climate policy does impose an additional cost on the EU of 1.5% of GDP, but this is less than the 2.2% of GDP that the EU would lose from the oil price rise in the absence of climate policy. This is evidence that even unilateral climate policy does offer some economic protection for the EU.
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Bibliographic InfoPaper provided by Institute for Prospective and Technological Studies, Joint Research Centre in its series JRC-IPTS Working Papers with number JRC68858.
Length: 28 pages
Date of creation: Feb 2012
Date of revision:
Oil price; general equilibrium; climate policy;
Other versions of this item:
- Maisonnave, Hélène & Pycroft, Jonathan & Saveyn, Bert & Ciscar, Juan-Carlos, 2012. "Does climate policy make the EU economy more resilient to oil price rises? A CGE analysis," Energy Policy, Elsevier, vol. 47(C), pages 172-179.
- Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters
- C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
- Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
This paper has been announced in the following NEP Reports:
- NEP-AGR-2013-04-20 (Agricultural Economics)
- NEP-ALL-2013-04-20 (All new papers)
- NEP-CMP-2013-04-20 (Computational Economics)
- NEP-ENE-2013-04-20 (Energy Economics)
- NEP-ENV-2013-04-20 (Environmental Economics)
- NEP-EUR-2013-04-20 (Microeconomic European Issues)
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