Green Transitions in Coal-Dependent Economies: A Hybrid Computable General Equilibrium Analysis of the Czech National Energy and Climate Plan

Vědunka Kopečná and Inaki Veruete Villegas
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Inaki Veruete Villegas: Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic & Charles University, Environment Center

No 2026/06, Working Papers IES from Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies

Abstract: This paper assesses the long-term macroeconomic and environmental impacts of climate policies in the Czech Republic, a coal-dependent economy, under the EU´s Fit-for-55 package. Using a hybrid dynamic Computable General Equilibrium (CGE) model, we integrate a bottom-up electricity module with technology-specific detail and a discrete choice module capturing consumer preferences for vehicle technologies. The model, formulated as a mixed complementarity problem in GAMS, accounts for capacity constraints in power generation and endogenizes vehicle fleet evolution based on choice probabilities. We evaluate two scenarios: With Existing Measures (WEM), reflecting current policies, and With Additional Measures (WAM), which includes coal phase-out, expanded renewables, and the introduction of ETS2. Results show that WAM leads to more than 60% reduction in power sector CO2 emissions by 2040 and 80% battery electric vehicle (BEV) adoption by 2050. However, green investments under WAM do not balance out structural shifts - especially in fossil-related sectors - negatively influencing GDP. This integrated top-down and bottom-up modeling approach offers a robust framework for evaluating economy-wide effects of climate action. Findings inform cost-effective and socially balanced decarbonization strategies for Czech and EU policymakers.

Keywords: Hybrid CGE model; Green Transition; Climate policies; Energy and transport (search for similar items in EconPapers)
JEL-codes: C68 D12 D58 H22 H23 Q43 Q52 R42 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2026-05, Revised 2026-05
New Economics Papers: this item is included in nep-dcm and nep-tre
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