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The economic impacts of UK trade-enhancing industrial policies and their spillover effects on the energy system

Andrew Ross, Grant Allan (), Gioele Figus (), Peter McGregor (), J Kim Swales () and Karen Turner
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Gioele Figus: Department of Economics University of Strathclyde
Peter McGregor: Department of Economics University of Strathclyde
J Kim Swales: Department of Economics University of Strathclyde
Karen Turner: Centre for Energy Policy, University of Strathclyde

No 1810, Working Papers from University of Strathclyde Business School, Department of Economics

Abstract: The wider impacts of energy policy on the macro-economy are increasingly recognised in the academic and policy-oriented literatures. Additionally, the interdependence of energy and economy implies that a (policy) change in the non-energy system impacts on the energy system. However, such spillovers on the energy system have not been extensively researched. We begin by analysing the impacts of export promotion policies - a key element of the UK’s Industrial Strategy - on the energy system and energy policy goals. As the impacts of such policies are, in large part, transmitted via their effects on the economy, we adopt a computable general equilibrium model - UK-ENVI - that fully captures such interdependence. Our results suggest that an across-the-board stimulus to exports increases total energy use significantly. This does not come directly through energy exports, but indirectly through the energy sectors’ linkages to other sectors. Export led growth therefore impacts on energy use - and significantly so. This in turn is likely to have an adverse impact on emission targets. Policy makers should be aware of the fact that a successful implementation of the Industrial Strategy may create significant tensions with the UK’s Clean Growth Strategy, for example, and with the goals of energy policy more generally. The importance of this effect will in practice depend upon: the mix of goods and services that are exported (an issue that we shall address once the export strategy is published); the success of low-carbon policies. Ultimately, a knowledge of the nature and scale of these spillover effects of economic policies on the energy system creates the potential for more effective and efficient policy making.

Keywords: energy policy; industrial strategy; trade policy (search for similar items in EconPapers)
JEL-codes: C68 D58 Q43 Q48 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ene and nep-int
Date: 2018-07
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