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Energy and Climate Policy: Quantifying the Benefits of a European Approach

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  • Mathias Mier

Abstract

The European Emissions Trading System is a cornerstone of the EU climate policy and its development is set until 2030. However, it is unclear what will happen afterwards. This policy brief compares three different scenarios: Rapid Decarbonization, 2050 Climate Neutral and a Break scenario. The simulations quantify the total benefits of a joint European effort at EUR 248 billion between 2024 and 2050. In the worst-case scenario, total costs could reach EUR 8.629 trillion. Key Messages The European Union Emissions Trading System has considerable monetary and environmental advantages over national systems. I compare three different policy scenarios to examine the impact of joint European efforts beyond 2030: Rapid Decarbonization, 2050 Climate Neutrality, and a Break scenario. A common European Union approach leads to monetary advantages generated by lower electricity prices and reduced need for subsidies. The simulations quantify the total benefits for Europe over the period 2024–2050 at EUR 248 billion, for Germany at EUR 66 billion.

Suggested Citation

  • Mathias Mier, 2024. "Energy and Climate Policy: Quantifying the Benefits of a European Approach," EconPol Policy Brief 58, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    • Handle: RePEc:ces:econpb:_58
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    File URL: https://www.ifo.de/DocDL/EconPol-PolicyBrief_58_Energy-Climate-Policy.pdf
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    References listed on IDEAS

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    1. Mier, Mathias & Siala, Kais & Govorukha, Kristina & Mayer, Philip, 2023. "Collaboration, decarbonization, and distributional effects," Applied Energy, Elsevier, vol. 341(C).
    2. Mier, Mathias & Adelowo, Jacqueline & Weissbart, Christoph, 2024. "Complementary taxation of carbon emissions and local air pollution," Energy Economics, Elsevier, vol. 132(C).
    3. Mier, Mathias & Azarova, Valeriya, 2024. "Investment cost specifications revisited," Energy Policy, Elsevier, vol. 188(C).
    4. Mathias Mier, 2024. "Energie- und Klimapolitik: Effekte eines europäischen Ansatzes auf Preise, Versorgungssicherheit und CO₂-Emissionen in Deutschland," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 77(05), pages 15-18, May.
    5. Siala, Kais & Mier, Mathias & Schmidt, Lukas & Torralba-Díaz, Laura & Sheykhha, Siamak & Savvidis, Georgios, 2022. "Which model features matter? An experimental approach to evaluate power market modeling choices," Energy, Elsevier, vol. 245(C).
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