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Climate change policy in European countries and its effects on industry

Author

Listed:
  • Stef Proost

    (K.U.Leuven, C.E.S., Energy, Transport and Environment)

  • Denise Van Regemorter

    (K.U.Leuven, C.E.S., Energy, Transport and Environment)

Abstract

In this paper we discuss the effects of different climate change policies on industrial activity. We compare the effects of carbon taxes, grandfathered permits, technology standards and voluntary agreements. We survey first the insights from economic theory and from model experiments for the US. Next we use a general equilibrium model, to assess the effect of different climate change policies on industrial activity per sector and per member country in the EU. We pay particular attention to the effects of policies where EU member states exempt their energy-intensive sectors from abatement efforts. The main findings are that, in the EU, the effects on industrial activity and the welfare costs of carbon abatement policies that use tradeable permits or carbon taxes are small when no industrial sectors are exempted. When one member country exempts its energy intensive sector, this will have a small positive impact on its activity level but will generate an extra welfare cost for the EU.

Suggested Citation

  • Stef Proost & Denise Van Regemorter, 2003. "Climate change policy in European countries and its effects on industry," Energy, Transport and Environment Working Papers Series ete0305, KU Leuven, Department of Economics - Research Group Energy, Transport and Environment.
    • Handle: RePEc:ete:etewps:ete0305
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    Cited by:

    1. Saveyn Bert & Van Regemorter Denise, 2007. "Environmental Policy in a Federal State - A Regional CGE Analysis of the NEC Directive in Belgium," Energy, Transport and Environment Working Papers Series ete0701, KU Leuven, Department of Economics - Research Group Energy, Transport and Environment.
    2. Olga Kiuila, 2011. "Interactions between trade and environmental policies in the Czech economy," Working Papers 2011-16, Faculty of Economic Sciences, University of Warsaw.
    3. DURAND-LASSERVE, Olivier & Pierru , Axel & SMEERS, Yves, 2012. "Sensitivity of policy simulation to benchmark scenarios in CGE models: illustration with carbon leakage," LIDAM Discussion Papers CORE 2012063, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    4. Birgit Bednar-Friedl & Karl Farmer & Andreas Rainer, 2010. "Effects of Unilateral Climate Policy on Terms of Trade, Capital Accumulation, and Welfare in a World Economy," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 47(4), pages 495-520, December.
    5. Taheripour, Farzad & Khanna, Madhu & Nelson, Charles, 2005. "Welfare Impacts of Alternative Public Policies for Environmental Protection in Agriculture in an Open Economy: A General Equilibrium Framework," 2005 Annual meeting, July 24-27, Providence, RI 19317, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).

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