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GEEM: a policy model for assessing climate-energy reforms in Italy

Author

Listed:
  • Barbara Annicchiarico
  • Susan Battles
  • Fabio Di Dio
  • Pierfrancesco Molina
  • Pietro Zoppoli

Abstract

We build up a large scale, New Keynesian dynamic general equilibrium model embodying a cap on pollutant emissions, an electricity sector and fuel consumption to analyse climate-energy policies for the Italian economy. We consider several applications to illustrate how emission mitigation policies are likely to affect the economy. Our results show that a major trade-off may emerge between environmental quality and economic activity. However, we show how this potential trade-off can be effectively overcome by recycling the revenues from the sales of emission permits. Also,we find that the presence of an emission cap may significantly limit the expansionary effects of fiscal interventions as well as of policies aimed at fostering competition and productivity. Finally, a negative shock on gas and oil prices has a positive effect on the level of economic activity but is also found to increase investment in renewable sources.

Suggested Citation

  • Barbara Annicchiarico & Susan Battles & Fabio Di Dio & Pierfrancesco Molina & Pietro Zoppoli, 2016. "GEEM: a policy model for assessing climate-energy reforms in Italy," Working Papers 3, Department of the Treasury, Ministry of the Economy and of Finance.
    • Handle: RePEc:itt:wpaper:2016-3
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    File URL: http://www.dt.mef.gov.it/export/sites/sitodt/modules/documenti_it/analisi_progammazione/working_papers/WP_N_3_-_Maggio_2016.pdf
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    References listed on IDEAS

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    Cited by:

    1. Annicchiarico, Barbara & Battles, Susan & Di Dio, Fabio & Molina, Pierfrancesco & Zoppoli, Pietro, 2017. "GHG mitigation schemes and energy policies: A model-based assessment for the Italian economy," Economic Modelling, Elsevier, vol. 61(C), pages 495-509.

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    More about this item

    Keywords

    Environmental policy; GHG emissions; dynamic general equilibrium model; simulation analysis; Italy;
    All these keywords.

    JEL classification:

    • E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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