Environmental climate instruments in Romania: A comparative approach using dynamic CGE modelling

Rodica Loisel ()
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Rodica Loisel: CIRED - centre international de recherche sur l'environnement et le développement - Cirad - Centre de Coopération Internationale en Recherche Agronomique pour le Développement - EHESS - École des hautes études en sciences sociales - AgroParisTech - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique

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Abstract: This study simulates a CO2 permit market in Romania using a dynamic general equilibrium model. The carbon constraint is set at 20.7% below the reference emissions level for sectors eligible according to the EU-ETS (European Union Emission Trading Scheme). Free permit distribution enhances growth despite a severe emissions cap, because environmental regulation stimulates structural changes (Porter, 1991). That is, grandfathering allows sectors additional resources to invest in developing technologies, but it also raises the CO2 abatement costs because of energy rebound effects from enhanced growth. Results under endogenous growth (Romer, 1990) are very similar to those obtained under an exogenous growth scenario (Ramsey, 1928), as the substitution effects are responsible for the majority of variations; in addition, Romanian research activities are too modest to significantly impact this system. The abatement cost per unit of GDP is higher under endogenous growth, as spillover effects reduce incentives to invest. Technological diffusion continues to have a positive impact on economic growth, which counterbalances the free-riding attitude adopted by some energy-intensive sectors, such as glass and cement.

Keywords: spillover effects; tradable permits; Romania; endogenous/exogenous growth; spillover effects. (search for similar items in EconPapers)
Date: 2009-06
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00441491v1
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Citations: View citations in EconPapers (9)

Published in Energy Policy, 2009, 37 (6), pp.2190-2204. ⟨10.1016/j.enpol.2009.02.001⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-00441491

DOI: 10.1016/j.enpol.2009.02.001

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