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National economic impacts of an EU environmental policy: an applied general equilibrium analysis

  • Conrad, Klaus
  • Schmidt, Tobias F. N.
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    The objective of this paper is to quantify the economic effects of the introduction of a system of tradable permits in the European Union (EU). For this purpose we use linked applied general equilibrium models (AGE) for eleven EU member countries. This method enables us to measure the change in competitiveness for domestic industries, the impact on growth, employment and inflation in member countries, and the cost and benefits of a cooperative approach to adhere to a EU target of emissions of air pollutants. The results we will present are first results from the SOLVGE/GEM-E3 Projekt. GEM-E3 stands for General Equilibrium Modeling for Energy - Economy - Environment, a joint undertaking of NTUA-Athens (P. Capros, P. Georgakopoulos), CESKULeuven (S. Proost and D. Van Regemorter), Univ. Mannheim and ZEW (K. Conrad and T. Schmidt), GEMME-CEA (N. Ladoux), Univ. Strathclyde (P. MacGregor), CORE-UCL (Y. Smeers), With respect to a policy on greenhouse gases we will quantify the economic impact for the, EU by introducing a EU-wide tradable permit system, free of charge and based on the present energy intensity and energy mix. Under growth there will be a positive market price for permits with demand by countries where the cost of substitution are high and supply by those countries where the cost of substitution are low. We will measure economic performance and trade flows under a noncoordinated CO2 policy where each country limits the emission of CO2 by 10% and will compare the result with a cooperative outcome where the European Union as a decision maker aims at reducing CO2 by 10%.

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    File URL: http://econstor.eu/bitstream/10419/29395/1/257561196.pdf
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    Paper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 95-22.

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    Date of creation: 1995
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    Handle: RePEc:zbw:zewdip:9522
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    1. John Whalley & Randall Wigle, 1991. "Cutting CO2 Emissions: The Effects of Alternative Policy Approaches," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 109-124.
    2. Jorgenson, Dale W. & Wilcoxen, Peter J., 1990. "Intertemporal general equilibrium modeling of U.S. environmental regulation," Journal of Policy Modeling, Elsevier, vol. 12(4), pages 715-744.
    3. Bergman, Lars, 1990. "Energy and environmental constraints on growth: A CGE modeling approach," Journal of Policy Modeling, Elsevier, vol. 12(4), pages 671-691.
    4. Jorgenson, Dale W. & Wilcoxen, Peter J., 1993. "Energy the environment, and economic growth," Handbook of Natural Resource and Energy Economics, in: A. V. Kneese† & J. L. Sweeney (ed.), Handbook of Natural Resource and Energy Economics, edition 1, volume 3, chapter 27, pages 1267-1349 Elsevier.
    5. Lars Bergman, 1991. "General equilibrium effects of environmental policy: A CGE-modeling approach," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 1(1), pages 43-61, March.
    6. Oates, Wallace E & Portney, Paul R & McGartland, Albert M, 1989. "The Net Benefits of Incentive-Based Regulation: A Case Study of Environmental Standard Setting," American Economic Review, American Economic Association, vol. 79(5), pages 1233-42, December.
    7. Conrad, K & Schroder, M, 1991. "Demand for Durable and Nondurable Goods, Environmental Policy and Consumer Welfare," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 6(3), pages 271-86, July-Sept.
    8. Alan S. Manne & Richard G. Richels, 1991. "Global CO2 Emission Reductions - the Impacts of Rising Energy Costs," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 87-108.
    9. Conrad, Klaus, 1983. "Cost prices and partially fixed factor proportions in energy substitution," European Economic Review, Elsevier, vol. 21(3), pages 299-312, May.
    10. Conrad, Klaus & Schroder, Michael, 1993. "Choosing environmental policy instruments using general equilibrium models," Journal of Policy Modeling, Elsevier, vol. 15(5-6), pages 521-543.
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