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GTAP Resource #3628

"Is the European climate policy a jab against an oil shock? A CGE analysis "
by Saveyn, Bert, Jonathan Pycroft, Helene Maisonnave and Juan Carlos Ciscar

The EU is committed to reduce GHG emissions by 20% in 2020. One of rationales for this policy is the idea that a less CO2-intensive economy increases the energy security of the EU.
Very few studies have looked to the possible benefits of the EU climate policy in terms of energy-security, and to the interaction between high oil prices and climate policy in particular.
Our results suggest that the EU climate policy seems to be a kind of vaccination jab, making EU less susceptible to higher oil prices. As firms and government are less reliant on oil, EU firms are less hit by an oil shock when a climate policy is in place.
We try to evaluate the extent to which a climate policy protects EU from an oil price rise. We use the GEM-E3 model, a world CGE model designed to evaluate environmental policies. We analyze three scenarios. The 1st scenario looks to the impact of an increase in the oil price. The 2nd scenario analyses the EU climate policy, and finally, the 3rd scenario analyses the oil shock when the EU climate policy is implemented. Each of these scenarios has environmental impacts: high oil prices tend to reduce GHG emissions by inducing producers and consumers to change their behaviours, and EU climate policy also reduces GHG emissions through substitution, abatement and output reduction.
We find that in the 1st scenario, the oil price rise reduces emissions significantly, and all the countries suffer economically, especially China. In the 2nd scenario, the climate policy is implemented only for EU, but the resulting economic slowdown has impacts on its trade partners. The 3rd scenario, which combines the policies, has interesting results notably that EU suffers less from the oil shock if a climate policy is set up. Though this result is expected, it demonstrates a positive side effect of climate policy which does indeed act as a jab against a rise in the oil price.

Resource Details (Export Citation) GTAP Keywords
Category: 2011 Conference Paper
Status: Published
By/In: Presented at the 14th Annual Conference on Global Economic Analysis, Venice, Italy
Date: 2010
Created: Saveyn, B. (4/15/2011)
Updated: Saveyn, B. (4/15/2011)
Visits: 1,761
- Climate change policy
- European Union

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