Studies

Moreover GEM-E3 World contributed to the study for DG Environment, "Greenhouse gas Reduction Pathways in the UNFCCC Process up to 2025", the report can be found on http://europa.eu.int/comm/environment/climat/studies.htm

• Modelling the health related benefits of environmental policies and their feedback effects, a CGE analysis for the EU countries with GEM-E3

  A number of recent studies on taxation in the presence of externalities in a second-best framework consider the implications of taking into account the feedback effects of environmental quality. This paper explores by means of GEM-E3, a computable general equilibrium model for the EU countries, the importance of the feedback effects of the health related benefits from an environmental policy. The modelling framework implemented in GEM-E3 allows for three channels through which the feedback can occur: a decrease in medical expenditure, an increase in the consumers' available time and an increase of labour productivity in the production sectors. The results show that the explicit modelling of the health related effect of air pollution on consumers and producers allows for a better evaluation of the impact of environmental policies on private consumption and employment. However, in terms of global effect, the impacts of the feedback are small, compared to the standard GEM-E3 model where the health related benefits are evaluated ex-post.

  For the full text: download working paper (531 KB)

• Climate change policy in European countries and its effects on industry

  In this paper the effects of different climate change policies on industrial activity are discussed. The effects of carbon taxes, grandfathered permits, technology standards and voluntary agreements are compared. After a survey of the insights from economic theory and from model experiments for the US, the general equilibrium model GEM-E3 is used to assess the effect of different climate change policies on industrial activity per sector and per member country in the EU. Particular attention is paid to the effects of policies where EU member states exempt their energy-intensive sectors from abatement efforts. The main findings are that, in the EU, the effects on industrial activity and the welfare costs of carbon abatement policies that use tradeable permits or carbon taxes are small when no industrial sectors are exempted. When one member country exempts its energy intensive sector, this will have a small positive impact on its activity level but will generate an extra welfare cost for the EU.

  For the full text: download working paper (235 KB)

• The macroeconomic evaluation of energy tax policies within the EU, with GEM-E3-Europe

  This report presents the results of the study on the economic and environmental impacts of energy tax policies in the EU with the general equilibrium model GEM-E3. The policies evaluated in this study were first the implementation of the pending proposal, imposing EU-wide minimum tax rates for a wide range of energy products combined with a tax recycling through a decrease of the social security contribution or through a reduction of public debt, secondly the implementation of more environmentally friendly energy tax rates, first in all EU countries and then with enhanced cooperation, where only a subset of the Member States takes part in the EU wide energy tax regime, and finally the impact of a carbon tax, combined with an allowance trading system for electricity and heat generators and energy intensive sectors as proposed in the Commission Directive (COM(2001)581) such as to reach the Kyoto target for the EU.

  For the full text: download the report (3.2 MB)

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Most recent update: August 3, 2005