IDEAS home Printed from https://ideas.repec.org/p/ipt/iptwpa/jrc68858.html
   My bibliography  Save this paper

Does climate policy make the EU economy more resilient to oil price rises? A CGE analysis

Author

Listed:

Abstract

The European Union has committed itself to reduce greenhouse gas (GHG) emissions by 20% in 2020 compared with 1990 levels. This paper investigates whether this policy has an additional benefit in terms of economic resilience by protecting the EU from the macroeconomic consequences due to an oil price rise. We use the GEM-E3 computable general equilibrium model to analyze the results of three scenarios. The first one refers to the impact of an increase in the oil price. The second scenario analyses the European climate policy and the third scenario analyses the oil price rise when the European climate policy is implemented. Unilateral EU climate policy imposes a cost on the EU of around 1.0% of GDP. An oil price rise in the presence of EU climate policy does impose an additional cost on the EU of 1.5% of GDP, but this is less than the 2.2% of GDP that the EU would lose from the oil price rise in the absence of climate policy. This is evidence that even unilateral climate policy does offer some economic protection for the EU.

Suggested Citation

  • Helene Maisonnave & Jonathan Pycroft & Bert Saveyn & Juan Carlos CISCAR, 2012. "Does climate policy make the EU economy more resilient to oil price rises? A CGE analysis," JRC Research Reports JRC68858, Joint Research Centre.
    • Handle: RePEc:ipt:iptwpa:jrc68858
    as

    Download full text from publisher

    File URL: https://publications.jrc.ec.europa.eu/repository/handle/JRC68858
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Julie Rozenberg & Stéphane Hallegatte & Adrien Vogt-Schilb & Olivier Sassi & Céline Guivarch & Henri Waisman & Jean Charles Hourcade, 2010. "Climate policies as a hedge against the uncertainty on future oil supply," Post-Print hal-00667118, HAL.
    2. Lutz Kilian, 2008. "The Economic Effects of Energy Price Shocks," Journal of Economic Literature, American Economic Association, vol. 46(4), pages 871-909, December.
    3. James D. Hamilton, 2009. "Causes and Consequences of the Oil Shock of 2007-08," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 40(1 (Spring), pages 215-283.
    4. Fischer, Carolyn, 2001. "Rebating Environmental Policy Revenues: Output-Based Allocations and Tradable Performance Standards," Discussion Papers 10709, Resources for the Future.
    5. Turton, Hal & Barreto, Leonardo, 2006. "Long-term security of energy supply and climate change," Energy Policy, Elsevier, vol. 34(15), pages 2232-2250, October.
    6. Yazid Dissou, 2005. "Output-Based Emissions Allowances and the Equity-Efficiency Trade-off," Working Papers 0505E, University of Ottawa, Department of Economics.
    7. Saveyn, Bert & Van Regemorter, Denise & Ciscar, Juan Carlos, 2011. "Economic analysis of the climate pledges of the Copenhagen Accord for the EU and other major countries," Energy Economics, Elsevier, vol. 33(S1), pages 34-40.
    8. Alain Bernard & Marc Vielle, 2008. "GEMINI-E3, a general equilibrium model of international–national interactions between economy, energy and the environment," Computational Management Science, Springer, vol. 5(3), pages 173-206, May.
    9. Stern,Nicholas, 2007. "The Economics of Climate Change," Cambridge Books, Cambridge University Press, number 9780521700801, October.
    10. Vielle, Marc & Viguier, Laurent, 2007. "On the climate change effects of high oil prices," Energy Policy, Elsevier, vol. 35(2), pages 844-849, February.
    11. Aleklett, Kjell & Höök, Mikael & Jakobsson, Kristofer & Lardelli, Michael & Snowden, Simon & Söderbergh, Bengt, 2010. "The Peak of the Oil Age - Analyzing the world oil production Reference Scenario in World Energy Outlook 2008," Energy Policy, Elsevier, vol. 38(3), pages 1398-1414, March.
    12. Conrad, K & Schroder, M, 1991. "Demand for Durable and Nondurable Goods, Environmental Policy and Consumer Welfare," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 6(3), pages 271-286, July-Sept.
    13. Kai Carstensen & Steffen Elstner & Georg Paula, 2011. "How Strongly Did the 2007/08 Oil Price Hike Contribute to the Subsequent Recession?," CESifo Working Paper Series 3357, CESifo.
    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. Toon Vandyck & Alban Kitous & Bert Saveyn & Kimon Keramidas & Luis Rey Los Santos & Krzysztof Wojtowicz, 2018. "Economic Exposure to Oil Price Shocks and the Fragility of Oil-Exporting Countries," Energies, MDPI, vol. 11(4), pages 1-19, April.
    2. Nong, Duy & Meng, Sam & Siriwardana, Mahinda, 2017. "An assessment of a proposed ETS in Australia by using the MONASH-Green model," Energy Policy, Elsevier, vol. 108(C), pages 281-291.
    3. Gracceva, Francesco & Zeniewski, Peter, 2014. "A systemic approach to assessing energy security in a low-carbon EU energy system," Applied Energy, Elsevier, vol. 123(C), pages 335-348.
    4. Alban Kitous & Bert Saveyn & Steve Gervais & Tobias Wiesenthal & Antonio Soria, 2013. "Analysis of the Iran Oil Embargo," JRC Research Reports JRC77983, Joint Research Centre.
    5. Millard, Robert & Withey, Patrick & Lantz, Van & Ochuodho, Thomas O., 2017. "The general equilibrium costs and impacts of oil price shocks in Newfoundland and Labrador," Energy Economics, Elsevier, vol. 68(C), pages 192-198.
    6. Wang, Kai-Hua & Kan, Jia-Min & Qiu, Lianhong & Xu, Shulin, 2023. "Climate policy uncertainty, oil price and agricultural commodity: From quantile and time perspective," Economic Analysis and Policy, Elsevier, vol. 78(C), pages 256-272.
    7. Sakamoto, Tomoyuki & Managi, Shunsuke, 2015. "Energy pricing impact on domestic economy under recent climate action," Economic Analysis and Policy, Elsevier, vol. 48(C), pages 150-162.
    8. Zoi Vrontisi & Alban Kitous & Bert Saveyn & Toon Vandyck, 2015. "Impact of low oil prices on the EU economy," JRC Research Reports JRC98188, Joint Research Centre.
    9. Laura-Patricia Oviedo-Toral & Davi Ezequiel François & Witold-Roger Poganietz, 2021. "Challenges for Energy Transition in Poverty-Ridden Regions—The Case of Rural Mixteca, Mexico," Energies, MDPI, vol. 14(9), pages 1-22, May.
    10. Guivarch, Céline & Vogt-Schilb, Adrien & Rozenberg, Julie & Monjon, Stéphanie, 2013. "Will climate policy improve European energy security?," Conference papers 332303, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.

    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. Wicker, Pamela & Becken, Susanne, 2013. "Conscientious vs. ambivalent consumers: Do concerns about energy availability and climate change influence consumer behaviour?," Ecological Economics, Elsevier, vol. 88(C), pages 41-48.
    2. Lutz Kilian, 2010. "Oil Price Shocks, Monetary Policy and Stagflation," RBA Annual Conference Volume (Discontinued), in: Renée Fry & Callum Jones & Christopher Kent (ed.),Inflation in an Era of Relative Price Shocks, Reserve Bank of Australia.
    3. Nouf Alsharif & Sambit Bhattacharyya & Maurizio Intartaglia, 2016. "Economic Diversification in Resource Rich Countries: Uncovering the State of Knowledge," Working Paper Series 09816, Department of Economics, University of Sussex Business School.
    4. Acurio Vásconez, Verónica & Giraud, Gaël & Mc Isaac, Florent & Pham, Ngoc-Sang, 2015. "The effects of oil price shocks in a new-Keynesian framework with capital accumulation," Energy Policy, Elsevier, vol. 86(C), pages 844-854.
    5. Joëts, Marc & Mignon, Valérie & Razafindrabe, Tovonony, 2017. "Does the volatility of commodity prices reflect macroeconomic uncertainty?," Energy Economics, Elsevier, vol. 68(C), pages 313-326.
    6. Antonakakis, Nikolaos & Chatziantoniou, Ioannis & Filis, George, 2017. "Oil shocks and stock markets: Dynamic connectedness under the prism of recent geopolitical and economic unrest," International Review of Financial Analysis, Elsevier, vol. 50(C), pages 1-26.
    7. Alaali, Fatema, 2020. "The effect of oil and stock price volatility on firm level investment: The case of UK firms," Energy Economics, Elsevier, vol. 87(C).
    8. Hellsmark, Hans & Jacobsson, Staffan, 2012. "Realising the potential of gasified biomass in the European Union—Policy challenges in moving from demonstration plants to a larger scale diffusion," Energy Policy, Elsevier, vol. 41(C), pages 507-518.
    9. Benchekroun, Hassan & van der Meijden, Gerard & Withagen, Cees, 2020. "OPEC, unconventional oil and climate change - On the importance of the order of extraction," Journal of Environmental Economics and Management, Elsevier, vol. 104(C).
    10. Zeina Alsalman, 2023. "Oil price shocks and US unemployment: evidence from disentangling the duration of unemployment spells in the labor market," Empirical Economics, Springer, vol. 65(1), pages 479-511, July.
    11. Kilian, Lutz, 2022. "Understanding the estimation of oil demand and oil supply elasticities," Energy Economics, Elsevier, vol. 107(C).
    12. Broadstock, David C. & Filis, George, 2014. "Oil price shocks and stock market returns: New evidence from the United States and China," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 33(C), pages 417-433.
    13. Ratti, Ronald A. & Vespignani, Joaquin L., 2013. "Liquidity and crude oil prices: China's influence over 1996–2011," Economic Modelling, Elsevier, vol. 33(C), pages 517-525.
    14. Zhu, Huiming & Huang, Xi & Ye, Fangyu & Li, Shuang, 2024. "Frequency spillover effects and cross-quantile dependence between crude oil and stock markets: Evidence from BRICS and G7 countries," The North American Journal of Economics and Finance, Elsevier, vol. 70(C).
    15. Spencer, Thomas & Lucas, Chancel & Emmanuel, Guerin, 2012. "Exiting the crisis in the right direction: A sustainable and shared prosperity plan for Europe," MPRA Paper 38802, University Library of Munich, Germany.
    16. Gatfaoui, Hayette, 2016. "Linking the gas and oil markets with the stock market: Investigating the U.S. relationship," Energy Economics, Elsevier, vol. 53(C), pages 5-16.
    17. Franco Ruzzenenti & Andreas A. Papandreou, 2015. "Effects of fossil fuel prices on the transition to a low-carbon economy," Working papers wpaper89, Financialisation, Economy, Society & Sustainable Development (FESSUD) Project.
    18. Lang, Korbinian & Auer, Benjamin R., 2020. "The economic and financial properties of crude oil: A review," The North American Journal of Economics and Finance, Elsevier, vol. 52(C).
    19. Ravazzolo Francesco & Rothman Philip, 2016. "Oil-price density forecasts of US GDP," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 20(4), pages 441-453, September.
    20. Michael Gelman & Yuriy Gorodnichenko & Shachar Kariv & Dmitri Koustas & Matthew D. Shapiro & Dan Silverman & Steven Tadelis, 2023. "The Response of Consumer Spending to Changes in Gasoline Prices," American Economic Journal: Macroeconomics, American Economic Association, vol. 15(2), pages 129-160, April.

    More about this item

    Keywords

    Oil price; general equilibrium; climate policy;
    All these keywords.

    JEL classification:

    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:ipt:iptwpa:jrc68858. 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: Publication Officer (email available below). General contact details of provider: https://edirc.repec.org/data/ipjrces.html .

    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.