Does climate policy make the EU economy more resilient to oil price rises? A CGE analysis

Hélène Maisonnave, Jonathan Pycroft, Bert Saveyn and Juan-Carlos Ciscar

No JRC68858, JRC Research Reports from Joint Research Centre

Abstract: The European Union has committed itself to reduce greenhouse gas (GHG) emissions by 20% in 2020 compared with 1990 levels. This paper investigates whether this policy has an additional benefit in terms of economic resilience by protecting the EU from the macroeconomic consequences due to an oil price rise. We use the GEM-E3 computable general equilibrium model to analyze the results of three scenarios. The first one refers to the impact of an increase in the oil price. The second scenario analyses the European climate policy and the third scenario analyses the oil price rise when the European climate policy is implemented. Unilateral EU climate policy imposes a cost on the EU of around 1.0% of GDP. An oil price rise in the presence of EU climate policy does impose an additional cost on the EU of 1.5% of GDP, but this is less than the 2.2% of GDP that the EU would lose from the oil price rise in the absence of climate policy. This is evidence that even unilateral climate policy does offer some economic protection for the EU.

Keywords: Oil price; general equilibrium; climate policy (search for similar items in EconPapers)
JEL-codes: C68 Q40 Q54 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2012-02
New Economics Papers: this item is included in nep-agr, nep-cmp, nep-ene, nep-env and nep-eur
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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Related works:
Journal Article: Does climate policy make the EU economy more resilient to oil price rises? A CGE analysis (2012)
Working Paper: Does climate policy make the EU economy more resilient to oil price rises? A CGE analysis (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:ipt:iptwpa:jrc68858

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