GEEM: a policy model for assessing climate-energy reforms in Italy

Barbara Annicchiarico (), Susan Battles, Fabio Di Dio (), Pierfrancesco Molina and Pietro Zoppoli

No 3, Working Papers from Department of the Treasury, Ministry of the Economy and of Finance

Abstract: We build up a large scale, New Keynesian dynamic general equilibrium model embodying a cap on pollutant emissions, an electricity sector and fuel consumption to analyse climate-energy policies for the Italian economy. We consider several applications to illustrate how emission mitigation policies are likely to affect the economy. Our results show that a major trade-off may emerge between environmental quality and economic activity. However, we show how this potential trade-off can be effectively overcome by recycling the revenues from the sales of emission permits. Also,we find that the presence of an emission cap may significantly limit the expansionary effects of fiscal interventions as well as of policies aimed at fostering competition and productivity. Finally, a negative shock on gas and oil prices has a positive effect on the level of economic activity but is also found to increase investment in renewable sources.

Keywords: Environmental policy; GHG emissions; dynamic general equilibrium model; simulation analysis; Italy (search for similar items in EconPapers)
JEL-codes: E27 E60 Q40 Q58 (search for similar items in EconPapers)
Pages: 46
Date: 2016-05
New Economics Papers: this item is included in nep-ene, nep-env, nep-eur and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:itt:wpaper:2016-3

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