Title: Does climate policy make the EU economy more resilient to oil price rises? A CGE analysis
Citation: ENERGY POLICY vol. 47 no. August p. 172-179
Publication Year: 2012
JRC N°: JRC74297
ISSN: 0301-4215
URI: http://www.sciencedirect.com/science/article/pii/S0301421512003588
DOI: 10.1016/j.enpol.2012.04.053
Type: Articles in periodicals and books
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 implies a cost on the EU of around 1.0% of GDP. An oil price rise in the presence of EU climate policy does imply an additional cost on the EU of 1.5% of GDP (making a total loss of 2.5% 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.
JRC Directorate:Growth and Innovation

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