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European emission mitigation policy and technological evolution - economic evaluation with the gem-e3-eg model


The post-Kyoto period will emphasize a growing need at the European Union level for specific decisions concerning the implementation of policies that aim at reducing atmospheric emissions. Any policy mix to be considered for implementation has to take into account a number of inter-related issues: The policy must

- identify inequalities in burden sharing and find ways to alleviate them (through, for example, revenue recycling of tax receipts or exemptions) - take into account technological possibilities and try to exploit the dynamics of innovation in order to promote incentives towards the development of less carbon-intensive technologies;
- take into account structural changes such as in consumption patterns; - define a realistic time-schedule for the implementation of QELROs (Quantified Emission Limitation and Reduction Objectives):
- not hinder economic growth.

The objective of this project is to provide a tool for the consistent evaluation of policy measures in terms of their differential implications for individual EU countries, sectors and consumers, at the level of detail needed to support concrete policy-making. This will be accomplished by the use of an extended version of the highly successful Gk M-E3 general equilibrium model which was developed on behalf of the Commission, DGXII.
The project can be separated in two interrelated components involving modelling research work and policy analysis through case studies. The first component concerns model development in the areas that are in the core of the climate debate, and that are inadequately covered by current empirical approaches:

- endogenous representation of dynamics of innovation and technological progress and their role in economic growth;
- a consistent representation of external costs of air pollution and its feedback on the behaviour of economic agents;
- engineering oriented representation of the energy system;
- representation of the links between policy measures and RTD orientation.
The case studies will aim to analvse a bundle of measures involving policy instruments which
- internalise externalities,
- ensure a RTD and technology prioritisation that achieve a long-term path of high economic growth in compliance with a predetermined QELRO, - take into account the overall environmental benefits,
- support the achievement of other related policy goals (e.g. employment, tax reforms, etc.).

Each policy package, involving a QELRO and accompanying policy measures, will be evaluated in terms of a catalogue of economic, environmental and distributional criteria. The proposed research activity will provide important quantitative information on the complex links of technical evolution, economy, energy and environment and their relation to the concerning policy fields and measures. The expected results will be based on a methodological consistent framework which enables high flexibility to the decision maker's needs.

Call for proposal

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Hl 7-1
68034 Mannheim

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EU contribution
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Participants (7)