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Economic, Trade and Employment Implications from EVs Deployment and Policies to Support Domestic Battery Manufacturing in the EU

Author

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  • Kostas Fragkiadakis
  • Ioannis Charalampidis
  • Panagiotis Fragkos
  • Leonidas Paroussos

Abstract

The decarbonization of the energy system requires the adoption of a mix of zero or low carbon intensive technological options, which depends on their cost-effectiveness, their potential to reduce emissions and on social acceptance issues. Transport electrification combined with renewable energy sources (RES) deployment in power generation is a key decarbonization option assessed in many recent studies that focus on national or international climate policies. The penetration of electric vehicles (EVs) together with a gradual retirement of conventional oil-fuelled vehicles implies that a new ‘trade ecosystem’ will be created characterized by different features (move from OPEX to CAPEX) and supply chains. A key component of the EVs are the Lithium-Ion batteries, the manufacturing of which is employment intensive and constitutes an essential element of the EVs that can act as a driver for establishing comparative advantages and increasing EV market shares. Our study focuses on the size of the EV market that can be established within ambitious global and EU decarbonization scenarios and investigates the economic, trade and employment implications considering the production chain of EVs (i.e., the regional production of batteries and vehicles). We use the large-scale global GEM-E3-FIT model to capture the trade dynamics of decarbonization scenarios. We find that under ambitious climate policies, the global size of the clean energy technologies will be US$44 trillion cumulatively over the 2020–2050 period. 44per cent of the market relates to EVs, which will mostly be produced outside EU. For the EU to capture a significant segment of the EV value chain, it needs to increase clean energy R&D and associated supportive policies so as to boost the domestic capacity to produce competitively batteries. JEL: F11, F13, F16, F18, F62, F68

Suggested Citation

  • Kostas Fragkiadakis & Ioannis Charalampidis & Panagiotis Fragkos & Leonidas Paroussos, 2020. "Economic, Trade and Employment Implications from EVs Deployment and Policies to Support Domestic Battery Manufacturing in the EU," Foreign Trade Review, , vol. 55(3), pages 298-319, August.
    • Handle: RePEc:sae:fortra:v:55:y:2020:i:3:p:298-319
    DOI: 10.1177/0015732520920466
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    References listed on IDEAS

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    1. Enrica De Cian & Ilkka Keppo & Johannes Bollen & Samuel Carrara & Hannah Förster & Michael Hübler & Amit Kanudia & Sergey Paltsev & Ronald D. Sands & Katja Schumacher, 2013. "European-Led Climate Policy Versus Global Mitigation Action: Implications On Trade, Technology, And Energy," Climate Change Economics (CCE), World Scientific Publishing Co. Pte. Ltd., vol. 4(supp0), pages 1-28.
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    1. Kostas Fragkiadakis & Panagiotis Fragkos & Leonidas Paroussos, 2020. "Low-Carbon R&D Can Boost EU Growth and Competitiveness," Energies, MDPI, vol. 13(19), pages 1-29, October.

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    More about this item

    Keywords

    GEM-E3-FIT; clean energy trade; battery manufacturing; decarbonization;
    All these keywords.

    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • F18 - International Economics - - Trade - - - Trade and Environment
    • F62 - International Economics - - Economic Impacts of Globalization - - - Macroeconomic Impacts
    • F68 - International Economics - - Economic Impacts of Globalization - - - Policy

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