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The EU Climate Policy Perspectives and Their Implications for Belgium

W. Nijs and D. Van Regemorter

Review of Business and Economic Literature, 2012, vol. 57, issue 2, 212-241

Abstract: This paper estimates the impact on Belgium of the EU climate policy. This policy intends to reduce the emissions of EU greenhouse gases (GHG) by 80% in 2050 compared to 1990 emissions. The EU target was distributed over member countries in a cost effective way with the European TIMES model and this resulted for Belgium, in a 59% reduction goal for CO2. One reference scenario and four scenarios with different assumptions for nuclear and carbon capture and storage were taken into account for the Belgian TIMES model. For this CO2 emission reduction objective, the crucial changes are a decrease in the growth of the demand for energy services (e.g. tonnes of steel, km driven) and a strong increase in the level of investments in low carbon technologies. A shift towards more energy efficient technologies is important in all scenarios. Carbon capture and storage (CCS) is the most important contributor to the emission target when CCS is allowed and nuclear is shut down. The annual welfare cost for the period 2005–2050 varies from 1.5 B€ 2005 per year when nuclear and CCS are available to 4.1 B€ 2005 per year when none of these options are available. However, the participation in a global EU CO2 market is essential for Belgium. Without the possibility of trade, the welfare loss increases with an additional 1.0 B€ 2005 per year when CCS is allowed and nuclear is shut down. The increase of the cost for energy services is about four times larger than the welfare loss. The reason is that the reduction in the demand for energy services requires strong increases in the energy prices for consumers.

Date: 2012
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Handle: RePEc:sen:rebelj:v:57:i:2:y:2012:p:212-241