The study utilizes a dynamic computable general equilibrium (CGE) model, GTAP-E, to analyze the global economic and sectoral implications of the European Green Deal's "Fit for 55" package. The simulation models a 55% reduction in emissions quotas in European countries, serving as a high-fidelity proxy for the policy's shock. Our findings reveal that the policy is a powerful decarbonization tool, leading to the dramatic contraction of fossil fuel-intensive sectors and a notable expansion in electricity value-added, signaling a successful energy transition. Counter to some concerns, the analysis indicates a net positive macroeconomic outcome for the implementing regions, driven by resource reallocation and an improved economic structure. Positive spillover effects, mediated through trade diversion and shifts in global energy prices, benefit other regions. The study also highlights critical policy challenges, such as potential carbon leakage and the social costs of industrial restructuring. Furthermore, the analysis reveals that the policy creates significant changes in regional labor endowments, suggesting a potential for new global labor migration patterns, underscoring the necessity of complementary measures like the Carbon Border Adjustment Mechanism (CBAM) for the policy's long-term success.

Authors:
Veronika Mitkova, Comenius University in Bratislava, Slovakia

About the Presenter(s)
Ing. Veronika Mitkova, PhD, is an associate professor at Comenius University in Bratislava, Slovakia. She is specializing in Computable General Equilibrium Modeling.

Connect on Linkedin
https://www.linkedin.com/in/veronika-mitkova-9a942b1b1

See this presentation on the full schedule – Saturday Schedule

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