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Green policies and transition risk propagation in production networks

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  • Aguilar, Pablo
  • González, Beatriz
  • Hurtado, Samuel

Abstract

This paper introduces a general equilibrium sectoral model including two types of energy sectors (green and brown) to study the short-run impact of different emission taxes schemes in production networks. The model is calibrated to the Spanish economy at the industry level using the input–output matrix and captures the effective cost of emissions associated to the use of energy in each industry. We show that for an increase in the price of emission allowances similar to that observed in recent years (from approximately €25 per tonne of CO2 in 2019 to almost €100 per tonne in 2022) the model predicts a cumulative decline in Spanish GDP after three years of 0.37%. The loss in value added is very heterogeneous among industries, depending on the exposure to the ETS and to their network ETS exposure, with values ranging from losses of 4% in the most affected industries to no impact in others.

Suggested Citation

  • Aguilar, Pablo & González, Beatriz & Hurtado, Samuel, 2023. "Green policies and transition risk propagation in production networks," Economic Modelling, Elsevier, vol. 126(C).
    • Handle: RePEc:eee:ecmode:v:126:y:2023:i:c:s0264999323002249
    DOI: 10.1016/j.econmod.2023.106412
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    References listed on IDEAS

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    More about this item

    Keywords

    Climate change; Green policies; Production networks; Input–output matrix;
    All these keywords.

    JEL classification:

    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General

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