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Does climate policy make the EU economy more resilient to oil price rises? A CGE analysis




The 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.

Suggested Citation

  • Helene Maisonnave & Jonathan Pycroft & Bert Saveyn & Juan Carlos CISCAR, 2012. "Does climate policy make the EU economy more resilient to oil price rises? A CGE analysis," JRC Working Papers JRC68858, Joint Research Centre (Seville site).
  • Handle: RePEc:ipt:iptwpa:jrc68858

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    References listed on IDEAS

    1. James D. Hamilton, 2009. "Causes and Consequences of the Oil Shock of 2007-08," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 40(1 (Spring), pages 215-283.
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    Cited by:

    1. repec:eee:enepol:v:108:y:2017:i:c:p:281-291 is not listed on IDEAS
    2. Gracceva, Francesco & Zeniewski, Peter, 2014. "A systemic approach to assessing energy security in a low-carbon EU energy system," Applied Energy, Elsevier, vol. 123(C), pages 335-348.
    3. Alban Kitous & Bert Saveyn & Steve Gervais & Tobias Wiesenthal & Antonio Soria, 2013. "Analysis of the Iran Oil Embargo," JRC Working Papers JRC77983, Joint Research Centre (Seville site).
    4. repec:eee:eneeco:v:68:y:2017:i:c:p:192-198 is not listed on IDEAS
    5. Sakamoto, Tomoyuki & Managi, Shunsuke, 2015. "Energy pricing impact on domestic economy under recent climate action," Economic Analysis and Policy, Elsevier, vol. 48(C), pages 150-162.
    6. Zoi Vrontisi & Alban Kitous & Bert Saveyn & Toon Vandyck, 2015. "Impact of low oil prices on the EU economy," JRC Working Papers JRC98188, Joint Research Centre (Seville site).

    More about this item


    Oil price; general equilibrium; climate policy;

    JEL classification:

    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • 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

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