The economic impact of the fight against climate change

A. Bruggeman
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A. Bruggeman: National Bank of Belgium, Research Department

Economic Review, 2011, issue ii, 59-76

Abstract: To fight climate change, global greenhouse gas (GHG) emissions should be reduced dramatically. However, observations for the period 2008-2009 indicate that several major countries will need to step up their efforts to reach their Kyoto target by 2012. For the period after 2012, only the EU has strongly committed itself to further reduce its GHG emissions. Any climate policy has to induce both producers and consumers to adjust their behaviour. Generally, governments use a combination of instruments while taking into account not only their effectiveness, but also social concerns and firms’ international competitiveness. Efforts to reduce GHG emissions will weigh on economic activity, but the impact could be attenuated if the proceeds from emissions permits and environmental taxes were recycled to stimulate the economy through lower labour taxes or support for R&D and innovation. In addition, investing in the development of low-carbon technologies also offers opportunities for innovation, sustainable growth and employment. The main channel for reducing GHG emissions is by lowering the energy intensity of economic activity. As Belgian industry has already made important efforts in this respect, there remains little room for manoeuvre given current technologies. At the same time, residential energy consumption and energy consumption for transport could be lowered considerably. As energy intensity cannot be reduced indefinitely, it is also important to increase the use of renewable energy sources and to invest in carbon capture and storage technologies.

Keywords: climate change; energy intensity; renewable energy; tradable emissions permits; environmental taxes; eco-innovation (search for similar items in EconPapers)
JEL-codes: O31 Q43 Q50 (search for similar items in EconPapers)
Date: 2011
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