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The economic impacts of UK trade-enhancing industrial policies and their spillover effects on the energy system

Author

Listed:
  • Andrew Ross

    () (Department of Economics, University of Strathclyde)

  • Grant Allan

    () (Department of Economics, University of Strathclyde)

  • Gioele Figus

    () (Department of Economics, University of Strathclyde)

  • Peter G McGregor

    () (Department of Economics, University of Strathclyde)

  • J Kim Swales

    () (Department of Economics, University of Strathclyde)

  • Karen Turner

    (Centre for Energy Policy, University of Strathclyde)

Abstract

The wider impacts of energy policy on the macro-economy are increasingly recognised in the academic and policy-oriented literatures. Additionally, the interdependence of energy and economy implies that a (policy) change in the non-energy system impacts on the energy system. However, such spillovers on the energy system have not been extensively researched. We begin by analysing the impacts of export promotion policies - a key element of the UK’s Industrial Strategy - on the energy system and energy policy goals. As the impacts of such policies are, in large part, transmitted via their effects on the economy, we adopt a computable general equilibrium model - UK-ENVI - that fully captures such interdependence. Our results suggest that an across-the-board stimulus to exports increases total energy use significantly. This does not come directly through energy exports, but indirectly through the energy sectors’ linkages to other sectors. Export led growth therefore impacts on energy use - and significantly so. This in turn is likely to have an adverse impact on emission targets. Policy makers should be aware of the fact that a successful implementation of the Industrial Strategy may create significant tensions with the UK’s Clean Growth Strategy, for example, and with the goals of energy policy more generally. The importance of this effect will in practice depend upon: the mix of goods and services that are exported (an issue that we shall address once the export strategy is published); the success of low-carbon policies. Ultimately, a knowledge of the nature and scale of these spillover effects of economic policies on the energy system creates the potential for more effective and efficient policy making.

Suggested Citation

  • Andrew Ross & Grant Allan & Gioele Figus & Peter G McGregor & J Kim Swales & Karen Turner, 2018. "The economic impacts of UK trade-enhancing industrial policies and their spillover effects on the energy system," Working Papers 18-10, University of Strathclyde Business School, Department of Economics.
  • Handle: RePEc:str:wpaper:18-10
    as

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    References listed on IDEAS

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    1. repec:cep:cepbxt:02 is not listed on IDEAS
    2. Dhingra, Swati & Ottaviano, Gianmarco I. P. & Sampson, Thomas & Reenen, John Van, 2016. "The consequences of Brexit for UK trade and living standards," LSE Research Online Documents on Economics 66144, London School of Economics and Political Science, LSE Library.
    3. David N.F. Bell & David G. Blanchflower, 2018. "Underemployment and the Lack of Wage Pressure in the UK," National Institute Economic Review, National Institute of Economic and Social Research, vol. 243(1), pages 53-61, February.
    4. Black, Angela J & FitzRoy, Felix R, 2000. "Earning Curves and Wage Curves," Scottish Journal of Political Economy, Scottish Economic Society, vol. 47(5), pages 471-486, November.
    5. Bell, Brian & Nickell, Stephen & Quintini, Glenda, 2002. "Wage equations, wage curves and all that," Labour Economics, Elsevier, vol. 9(3), pages 341-360, July.
    6. Adams, Philip D & Higgs, Peter J, 1990. "Calibration of Computable General Equilibrium Models from Synthetic Benchmark Equilibrium Data Sets," The Economic Record, The Economic Society of Australia, vol. 66(193), pages 110-126, June.
    7. Allan, Grant & Hanley, Nick & McGregor, Peter & Swales, Kim & Turner, Karen, 2007. "The impact of increased efficiency in the industrial use of energy: A computable general equilibrium analysis for the United Kingdom," Energy Economics, Elsevier, vol. 29(4), pages 779-798, July.
    8. Bill Collier, 2000. "The UK Wage Curve: New Evidence from the British Household Panel Survey," Studies in Economics 0010, School of Economics, University of Kent.
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    More about this item

    Keywords

    energy policy; industrial strategy; trade policy;

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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