Economic Implications of EU Mitigation Policies: Domestic and International Effects

30 Pages Posted: 28 Apr 2016

See all articles by Francesco Bosello

Francesco Bosello

University of Milan - Department of Economics, Business and Statistics; CMCC - Centro Euro-Mediterraneo sui Cambiamenti Climatici

Marinella Davide

CMCC - Centro Euro-Mediterraneo sui Cambiamenti Climatici

Isabella Alloisio

Fondazione Eni Enrico Mattei (FEEM)

Date Written: April 27, 2016

Abstract

The EU has a consolidated climate and energy regulation: it played a pioneering role by adopting a wide range of climate change policies and establishing the first regional Emission Trading Scheme (EU ETS). These policies, however, raise several concerns regarding both their environmental effectiveness and their potentially negative effect on the economy, especially in terms of growth and competitiveness. The paper reviews the European experience in order to understand if these concerns are supported by quantitative evidence. It thus focuses on key economic indicators, such as costs, competitiveness and carbon leakage as assessed by quantitative ex-ante and ex-post analyses. A dedicated section, extends the investigation to the potential extra-EU spillover of the EU mitigation policy with a particular attention to developing countries. The objective of the paper is to highlight both the limits and the opportunities of the EU regulatory framework in order to offer policy insights to emerging and developing countries that are on the way to implement climate change measures. Overall, the European experience shows that the worries about the costs and competitiveness losses induced by climate regulation are usually overestimated, especially in the long term. In addition, a tightening climate policy regime in the EU might in fact negatively impact developing countries via deteriorated trade relations. Nonetheless it tends to facilitate a resource relocation that if well governed could be beneficial to those countries where the poor are mainly involved in rural activities.

Keywords: Climate Change, Climate Policy, Mitigation, Economic Impacts, GDP, Competitiveness

JEL Classification: F64, H23, O44, O52, Q54, R11

Suggested Citation

Bosello, Francesco and Davide, Marinella and Alloisio, Isabella, Economic Implications of EU Mitigation Policies: Domestic and International Effects (April 27, 2016). FEEM Working Paper No. 34.2016, Available at SSRN: https://ssrn.com/abstract=2771046 or http://dx.doi.org/10.2139/ssrn.2771046

Francesco Bosello (Contact Author)

University of Milan - Department of Economics, Business and Statistics

Via Festa del Perdono, 7
Milan, 20122
Italy

CMCC - Centro Euro-Mediterraneo sui Cambiamenti Climatici

via Augusto Imperatore, 16
Lecce, I-73100
Italy

Marinella Davide

CMCC - Centro Euro-Mediterraneo sui Cambiamenti Climatici ( email )

via Augusto Imperatore, 16
Lecce, I-73100
Italy

Isabella Alloisio

Fondazione Eni Enrico Mattei (FEEM) ( email )

C.so Magenta 63
Milano, 20123
Italy

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