Green EUROMOD: the environmental extension of the EU’s tax-benefit microsimulation model

This article introduces Green EUROMOD, the environmental extension of the EU’s tax-benefit microsimulation model EUROMOD. It provides a novel framework for evaluating the distributional, environmental, and fiscal impacts of green policy reforms across the 27 EU Member States. The model captures both direct greenhouse gas (GHG) emissions - such as those arising from household fuel combustion for heating and private transport - as well as indirect emissions occurring along value chains. Indirect emissions are further disaggregated into those embodied in domestically produced goods and services, and those embodied in imports from other EU Member States and the rest of the world. This granularity, combined with the capacity to simulate environmental and tax-benefit policies jointly and consistently across countries, makes Green EUROMOD a unique tool for the design and assessment of environmental policy reforms, with a particular focus on their distributional effects. The article outlines the model’s components and methodological framework, followed by a demonstration of its capabilities through two applications. First, we present the estimated household carbon footprints from consumption across the income and GHGemissions distribution, for the 27 EU countries. Second, we assess the extent to which GHG emissions are already implicitly priced by existing value-added and excise taxes. This provides new policy insights regarding the current baseline which future carbon pricing policies need to consider, as well as the relative performance of Member States in balancing green and fair objectives with their current consumption tax structures.