The main objective of this Action is to support policy formulation and economic analysis in the field of climate policy, by developing integrated economic analysis models of climate and carbon-related policy options.
The EU is leading the international negotiations in climate policy. Regarding the reduction of greenhouse gas emissions, the EU is committed to limit the temperature increase to 2 degrees Celsius. The EU has an emission reduction target of 20% in the year 2020, compared to 1990. The mitigation policies produce benefits in terms of avoided damages of climate change; on the other hand, assessing the consequences of climate change is essential also to design adaptation policies, in order to minimize the negative impacts of climate change and take advantage of the opportunities. The EU has defined a strategy on adaptation with the 2009 White Paper on Adaptation, which stresses the need to better know the possible consequences of climate change in Europe.
The main activity of the Action in terms of support to mitigation policies focuses on the analysis of the macroeconomic effects of sector-wise measures taken in carbon-intensive sectors. In addition, the Action carries out economic evaluations of the climate change impacts and the potential cost-benefit balance of adaptation measures.
The Action also aims at developing the appropriate methodologies and tools to address a wider span of policies, all of them around the "green growth" concept. Issues like environmental tax/green fiscal reform, green accounting, environmental welfare analysis and the like require a sound portfolio of tools to evaluate the efficiency and potential outcome of the policies in place.
The methodological toolbox to be built can be conceived around a basic instrument like GEM-E3, complemented with ad-hoc tools, designed and conceived to analyse specific issues.
The action builds on a long-term co-financed Administrative Arrangement (AA) set-up with the European Commission Directorate General for the Environment, whose origins are based on a Memorandum of Understanding set up since 2004.
More specifically, the Action:
- Analyzes the overall economic impact of specific climate change mitigation policies, both at European level and international level, based on the sector-wise scenarios delivered by ESEA and TSEA
- Assesses the economic impacts of on-going and future climate change, and the related adaptation strategies, paying particular attention to the comparison of the different damage patterns identified in order to provide clues for the prioritisation of adaptation policies. Impacts on capital stock, natural resources, overall competitiveness and therefore labour demand, terms of trade and GDP evolution are to be addressed.
- Studies alternative macro-economic policies fostering a more efficient and less distortive fiscal regime. Alternative formats of the green fiscal reform are developed and analysed in collaboration with the incumbent EC services.
- ICPS aims at providing the Commission services with the appropriate economic quantitative tools to support the regulatory policy in crucial sectors (electricity, gas, CO2 emissions, etc.)
The existence of an AA with a consolidated customer (European Commission's Directorate General for Climate Action) allows combining the investment in long-term capacity-building and direct support to the short-and mid-term policymaking process.
Collaborations within JRC:
The economic analysis of climate policies requires an integrated multi-disciplinary approach. Therefore, the tools and methodologies developed by the Action are used in conjunction with those of other Actions of this Agenda, in particular with the other two action within ECCET as well as several actions of the JRC's Institute for the Environment and Sustainability (IES).