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Besides promising economic growth, will the Italian NRRP also produce fewer emissions

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  • Ilenia Romani
  • Marzio Galeotti
  • Alessandro Lanza

Abstract

The investment projects funded by the Italian National Recovery and Resilience Plan (NRRP) aim to trigger an increase in GDP, that is in turn expected to drive energy consumption and carbon dioxide emissions up. At the same time, since an important share of the Plan’s investments is aimed at facilitating the green transition, we expect favorable effects on emissions. Which one of these two effects will prevail remains to be ascertained. In this study we have used the GEM model by Oxford Economics to build a number of scenarios and generate the relevant simulations. To validate the use of GEM we also considered the macroeconomic impact on GDP and unemployment rate generated by the model and compared the results with those presented by other institutions and obtained using different models. The results show that when the green investments of the NRRP display their effects, there are climatic benefits in terms of reduced emissions. Compared to the implementation of the NRRP in 2021, however, the reduction in emissions by 2030 is modest and equal to 5%. As those investments largely refer to the adoption of clean technologies, the climate benefits are likely to be more substantial only in subsequent years and over longer horizons

Suggested Citation

  • Ilenia Romani & Marzio Galeotti & Alessandro Lanza, 2022. "Besides promising economic growth, will the Italian NRRP also produce fewer emissions," Politica economica, Società editrice il Mulino, issue 1, pages 41-66.
    • Handle: RePEc:mul:je8794:doi:10.1429/104444:y:2022:i:1:p:41-66
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    1. Fabio Bacchini & Cristina Brandimarte & Piero Crivelli & Roberta De Santis & Marco Fioramanti & Alessandro Girardi & Roberto Golinelli & Cecilia Jona-Lasinio & Massimo Mancini & Carmine Pappalardo & D, 2013. "Building the core of the Istat system of models for forecasting the Italian economy: MeMo-It," Rivista di statistica ufficiale, ISTAT - Italian National Institute of Statistics - (Rome, ITALY), vol. 15(1), pages 17-45.
    2. Janos Varga & Jan in 't Veld, 2014. "The potential growth impact of structural reforms in the EU. A benchmarking exercise," European Economy - Economic Papers 2008 - 2015 541, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
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    More about this item

    Keywords

    Next Generation EU; National Recovery and Resilience Plan; Global Economic Model; post-COVID scenarios; energy consumption; CO2 emissions;
    All these keywords.

    JEL classification:

    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • C30 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - General

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