IDEAS home Printed from https://ideas.repec.org/a/eee/ecmode/v126y2023ics0264999323002249.html
   My bibliography  Save this article

Green policies and transition risk propagation in production networks

Author

Listed:
  • Aguilar, Pablo
  • González, Beatriz
  • Hurtado, Samuel

Abstract

This paper introduces a general equilibrium sectoral model including two types of energy sectors (green and brown) to study the short-run impact of different emission taxes schemes in production networks. The model is calibrated to the Spanish economy at the industry level using the input–output matrix and captures the effective cost of emissions associated to the use of energy in each industry. We show that for an increase in the price of emission allowances similar to that observed in recent years (from approximately €25 per tonne of CO2 in 2019 to almost €100 per tonne in 2022) the model predicts a cumulative decline in Spanish GDP after three years of 0.37%. The loss in value added is very heterogeneous among industries, depending on the exposure to the ETS and to their network ETS exposure, with values ranging from losses of 4% in the most affected industries to no impact in others.

Suggested Citation

  • Aguilar, Pablo & González, Beatriz & Hurtado, Samuel, 2023. "Green policies and transition risk propagation in production networks," Economic Modelling, Elsevier, vol. 126(C).
    • Handle: RePEc:eee:ecmode:v:126:y:2023:i:c:s0264999323002249
    DOI: 10.1016/j.econmod.2023.106412
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0264999323002249
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.econmod.2023.106412?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Martin L. Weitzman, 2012. "GHG Targets as Insurance Against Catastrophic Climate Damages," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 14(2), pages 221-244, March.
    2. Enghin Atalay, 2017. "How Important Are Sectoral Shocks?," American Economic Journal: Macroeconomics, American Economic Association, vol. 9(4), pages 254-280, October.
    3. Juin‐Jen Chang & Jhy‐Hwa Chen & Jhy‐Yuan Shieh & Ching‐Chong Lai, 2009. "Optimal Tax Policy, Market Imperfections, and Environmental Externalities in a Dynamic Optimizing Macro Model," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 11(4), pages 623-651, August.
    4. Simon Dietz & Frederick van der Ploeg & Armon Rezai & Frank Venmans, 2021. "Are Economists Getting Climate Dynamics Right and Does It Matter?," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 8(5), pages 895-921.
    5. Konstantinos Angelopoulos & George Economides & Apostolis Philippopoulos, 2013. "First-and second-best allocations under economic and environmental uncertainty," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 20(3), pages 360-380, June.
    6. Simon Dietz & Nicholas Stern, 2015. "Endogenous Growth, Convexity of Damage and Climate Risk: How Nordhaus' Framework Supports Deep Cuts in Carbon Emissions," Economic Journal, Royal Economic Society, vol. 0(583), pages 574-620, March.
    7. Ernst, Anne & Hinterlang, Natascha & Mahle, Alexander & Stähler, Nikolai, 2022. "Carbon pricing, border adjustment and climate clubs: An assessment with EMuSe," Discussion Papers 25/2022, Deutsche Bundesbank.
    8. Thomas Douenne, 2020. "The Vertical and Horizontal Distributive Effects of Energy Taxes: A Case Study of a French Policy," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 231-254.
    9. Thomas Allen & Stéphane Dees & Jean Boissinot & Carlos Mateo Caicedo Graciano & Valérie Chouard & Laurent Clerc & Annabelle de Gaye & Antoine Devulder & Sébastien Diot & Noémie Lisack & Fulvio Pegorar, 2020. "Climate-Related Scenarios for Financial Stability Assessment: an Application to France," Working papers 774, Banque de France.
    10. Branger, Frédéric & Quirion, Philippe, 2014. "Would border carbon adjustments prevent carbon leakage and heavy industry competitiveness losses? Insights from a meta-analysis of recent economic studies," Ecological Economics, Elsevier, vol. 99(C), pages 29-39.
    11. David Rezza Baqaee & Emmanuel Farhi, 2019. "The Macroeconomic Impact of Microeconomic Shocks: Beyond Hulten's Theorem," Econometrica, Econometric Society, vol. 87(4), pages 1155-1203, July.
    12. Garth Heutel, 2012. "How Should Environmental Policy Respond to Business Cycles? Optimal Policy under Persistent Productivity Shocks," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 15(2), pages 244-264, April.
    13. Garth Heutel, 2012. "How Should Environmental Policy Respond to Business Cycles? Optimal Policy under Persistent Productivity Shocks," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 15(2), pages 244-264, April.
    14. Mikhail Golosov & John Hassler & Per Krusell & Aleh Tsyvinski, 2014. "Optimal Taxes on Fossil Fuel in General Equilibrium," Econometrica, Econometric Society, vol. 82(1), pages 41-88, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Fahr, Stephan & Senner, Richard & Vismara, Andrea, 2024. "The globalization of climate change: amplification of climate-related physical risks through input-output linkages," Working Paper Series 2942, European Central Bank.
    2. Hinterlang, Natascha, 2024. "Different effects of carbon pricing and border adjustment in Germany and Spain," Economic Modelling, Elsevier, vol. 141(C).
    3. Fernández-Cerezo, Alejandro & Moral-Benito, Enrique & Quintana, Javier, 2024. "On the macroeconomic impact of NGEU funds and its propagation through the production network," Economic Modelling, Elsevier, vol. 132(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Pablo Aguilar & Beatriz González & Samuel Hurtado, 2022. "Carbon tax sectoral (CATS) model: a sectoral model for energy transition stress test scenarios," Occasional Papers 2218, Banco de España.
    2. Ernst, Anne & Hinterlang, Natascha & Mahle, Alexander & Stähler, Nikolai, 2023. "Carbon pricing, border adjustment and climate clubs: Options for international cooperation," Journal of International Economics, Elsevier, vol. 144(C).
    3. Drudi, Francesco & Moench, Emanuel & Holthausen, Cornelia & Weber, Pierre-François & Ferrucci, Gianluigi & Setzer, Ralph & Adao, Bernardino & Dées, Stéphane & Alogoskoufis, Spyros & Téllez, Mar Delgad, 2021. "Climate change and monetary policy in the euro area," Occasional Paper Series 271, European Central Bank.
    4. Hinterlang, Natascha & Martin, Anika & Röhe, Oke & Stähler, Nikolai & Strobel, Johannes, 2022. "Using energy and emissions taxation to finance labor tax reductions in a multi-sector economy," Energy Economics, Elsevier, vol. 115(C).
    5. Ernst, Anne & Hinterlang, Natascha & Mahle, Alexander & Stähler, Nikolai, 2022. "Carbon pricing, border adjustment and climate clubs: An assessment with EMuSe," Discussion Papers 25/2022, Deutsche Bundesbank.
    6. Hinterlang, Natascha & Martin, Anika & Röhe, Oke & Stähler, Nikolai & Strobel, Johannes, 2021. "Using energy and emissions taxation to finance labor tax reductions in a multi-sector economy: An assessment with EMuSe," Discussion Papers 50/2021, Deutsche Bundesbank.
    7. Eric Jondeau & Grégory Levieuge & Jean-Guillaume Sahuc & Gauthier Vermandel, 2023. "Environmental Subsidies to Mitigate Net-Zero Transition Costs," Working papers 910, Banque de France.
    8. Annicchiarico, Barbara & Diluiso, Francesca, 2019. "International transmission of the business cycle and environmental policy," Resource and Energy Economics, Elsevier, vol. 58(C).
    9. Dissou, Yazid & Karnizova, Lilia, 2016. "Emissions cap or emissions tax? A multi-sector business cycle analysis," Journal of Environmental Economics and Management, Elsevier, vol. 79(C), pages 169-188.
    10. Anton Nakov & Carlos Thomas, 2023. "Climate-conscious monetary policy," Working Papers 2334, Banco de España.
    11. Batten, Sandra & Millard, Stephen, 2024. "Energy and climate policy in a DSGE model of the United Kingdom," Bank of England working papers 1064, Bank of England.
    12. Eric Jondeau & Grégory Levieuge & Jean-Guillaume Sahuc & Gauthier Vermandel, 2022. "Environmental Subsidies to Mitigate Transition risk," Working Papers hal-04159804, HAL.
    13. Francesco Busato & Bruno Chiarini & Gianluigi Cisco & Maria Ferrara, 2023. "Green preferences," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 25(4), pages 3211-3253, April.
    14. Donadelli, Michael & Grüning, Patrick & Jüppner, Marcus & Kizys, Renatas, 2021. "Global temperature, R&D expenditure, and growth," Energy Economics, Elsevier, vol. 104(C).
    15. Ferrari, Alessandro & Nispi Landi, Valerio, 2024. "Whatever it takes to save the planet? Central banks and unconventional green policy," Macroeconomic Dynamics, Cambridge University Press, vol. 28(2), pages 299-324, March.
    16. Karp, Larry & Traeger, Christian, 2024. "Taxes versus quantities reassessed," Journal of Environmental Economics and Management, Elsevier, vol. 125(C).
    17. Diluiso, Francesca & Annicchiarico, Barbara & Kalkuhl, Matthias & Minx, Jan C., 2021. "Climate actions and macro-financial stability: The role of central banks," Journal of Environmental Economics and Management, Elsevier, vol. 110(C).
    18. Busato, Francesco & Chiarini, Bruno & Cisco, Gianluigi & Ferrara, Maria, 2021. "Greta Thunberg effect and Business Cycle Dynamics: A DSGE model," MPRA Paper 110141, University Library of Munich, Germany.
    19. Annicchiarico, Barbara & Correani, Luca & Di Dio, Fabio, 2018. "Environmental policy and endogenous market structure," Resource and Energy Economics, Elsevier, vol. 52(C), pages 186-215.
    20. Barbara Annicchiarico & Marco Carli & Francesca Diluiso, 2022. "Climate Policies, Macroprudential Regulation, and the Welfare Cost of Business Cycles," CEIS Research Paper 543, Tor Vergata University, CEIS, revised 31 Oct 2022.

    More about this item

    Keywords

    Climate change; Green policies; Production networks; Input–output matrix;
    All these keywords.

    JEL classification:

    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ecmode:v:126:y:2023:i:c:s0264999323002249. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/30411 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.