E-QUEST – A Multi-Region Sectoral Dynamic General Equilibrium Model with Energy Model Description and Applications to Reach the EU Climate Targets

Janos Varga, Werner Roeger and Jan in 't Veld

No 146, European Economy - Discussion Papers from Directorate General Economic and Financial Affairs (DG ECFIN), European Commission

Abstract: This paper describes a micro-founded, fully forward-looking dynamic general equilibrium (DGE) model with energy sectors that is used to analyse the macroeconomic impact of climate mitigation policy in the European Union (EU). The paper presents simulation results for the transitional costs of moving towards a net zero emissions economy. It does not attempt to assess the effects on growth of the green investments envisaged in the framework of the European Green Deal or the Recovery and Resilience Facility. Our model allows for substitutability between fossil fuels and clean energy inputs and considers different recycling options for the revenues collected by carbon taxes. We find that the costs of moving towards a net zero emissions economy can be significantly reduced when carbon taxes are used and are recycled to reduce other distortive taxes, or for subsidising clean energy.

JEL-codes: D5 Q43 Q50 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2021-09
New Economics Papers: this item is included in nep-dge, nep-eec, nep-ene and nep-env
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:euf:dispap:146

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