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Environmental climate instruments in Romania: A comparative approach using dynamic CGE modelling

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  • Rodica Loisel

    (CIRED - centre international de recherche sur l'environnement et le développement - Cirad - Centre de Coopération Internationale en Recherche Agronomique pour le Développement - EHESS - École des hautes études en sciences sociales - AgroParisTech - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique)

Abstract

This study simulates a CO2 permit market in Romania using a dynamic general equilibrium model. The carbon constraint is set at 20.7% below the reference emissions level for sectors eligible according to the EU-ETS (European Union Emission Trading Scheme). Free permit distribution enhances growth despite a severe emissions cap, because environmental regulation stimulates structural changes (Porter, 1991). That is, grandfathering allows sectors additional resources to invest in developing technologies, but it also raises the CO2 abatement costs because of energy rebound effects from enhanced growth. Results under endogenous growth (Romer, 1990) are very similar to those obtained under an exogenous growth scenario (Ramsey, 1928), as the substitution effects are responsible for the majority of variations; in addition, Romanian research activities are too modest to significantly impact this system. The abatement cost per unit of GDP is higher under endogenous growth, as spillover effects reduce incentives to invest. Technological diffusion continues to have a positive impact on economic growth, which counterbalances the free-riding attitude adopted by some energy-intensive sectors, such as glass and cement.

Suggested Citation

  • Rodica Loisel, 2009. "Environmental climate instruments in Romania: A comparative approach using dynamic CGE modelling," Post-Print halshs-00441491, HAL.
    • Handle: RePEc:hal:journl:halshs-00441491
    DOI: 10.1016/j.enpol.2009.02.001
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00441491
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    Cited by:

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    2. Kiuila, O. & Rutherford, T.F., 2013. "The cost of reducing CO2 emissions: Integrating abatement technologies into economic modeling," Ecological Economics, Elsevier, vol. 87(C), pages 62-71.
    3. Lin Yang & Yunfei Yao & Jiutian Zhang & Xian Zhang & Karl J. McAlinden, 2016. "A CGE analysis of carbon market impact on CO2 emission reduction in China: a technology-led approach," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 81(2), pages 1107-1128, March.
    4. Feng, Shenghao & Zhang, Keyu, 2018. "Fuel-factor nesting structures in CGE models of China," Energy Economics, Elsevier, vol. 75(C), pages 274-284.
    5. Lin Yang & Yunfei Yao & Jiutian Zhang & Xian Zhang & Karl McAlinden, 2016. "A CGE analysis of carbon market impact on CO 2 emission reduction in China: a technology-led approach," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 81(2), pages 1107-1128, March.
    6. Jaskólski, Marcin, 2016. "Modelling long-term technological transition of Polish power system using MARKAL: Emission trade impact," Energy Policy, Elsevier, vol. 97(C), pages 365-377.
    7. Mahmood, Arshad & Marpaung, Charles O.P., 2014. "Carbon pricing and energy efficiency improvement -- why to miss the interaction for developing economies? An illustrative CGE based application to the Pakistan case," Energy Policy, Elsevier, vol. 67(C), pages 87-103.
    8. Jia Liu & Jizu Li & Xilong Yao, 2019. "The Economic Effects of the Development of the Renewable Energy Industry in China," Energies, MDPI, vol. 12(9), pages 1-18, May.

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    Keywords

    spillover effects; tradable permits; Romania; endogenous/exogenous growth; spillover effects.;
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