Climate Change Mitigation and Policy Spillovers in the EU’s Immediate Neighborhood

Serhan Cevik, Nadeem Ilahi, Krzysztof Krogulski, Grace Li, Sabiha Mohona and Yueshu Zhao

No 2023/246, IMF Working Papers from International Monetary Fund

Abstract: EU’s neighborhood countries (EUN) have lagged the EU on emissions mitigation; coal-heavy power generation and industrial sectors are a key factor. They have also trailed EU countries in emissions mitigation policies since 2000, with little use of market-based instruments, and they still have substantial fossil fuel subsidies. Increasingly stringent EU mitigation policies are asociated with lower emissions in EUN. Overall output effects of the CBAM, in its current form, would be limited, though exports and emissions-intensive industries could be heavily impacted. A unilaterally adopted economywide carbon tax of $75 per ton would significantly lower emissions by 2030, with minimal consequences for output or household welfare, though a safety net for the affected workers may be necessary. To become competitive today by attracting green FDI and technology, overcoming infrastructure constraints and integrating into EU’s supply chains, EUN countries would be well served to front load decarbonization, rather than postpone it for later.

Keywords: Climate change; carbon emissions; climate change mitigation; carbon tax; Europe; EU mitigation policy; EUN country; policy spillover; neighborhood country; Greenhouse gas emissions; Climate policy; Global (search for similar items in EconPapers)
Pages: 39
Date: 2023-12-01
New Economics Papers: this item is included in nep-eec, nep-ene and nep-env
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