European sectoral analysis
The expansion of the European Union to 27 members in 2007 increased the number of consumers in the single market to 490m. The effects of enlargement since 2004 have been far-reaching, in both the economies of the new member states and the existing EU15 countries. Companies across the EU benefited from a larger market for export goods, and some of the EU15 economies benefited from a supply of relatively cheap labour. However, particularly in manufacturing, many traditional industries in the EU15 have struggled to compete against lower-cost producers in the new members.
CE provides an in-depth analysis of competitiveness in the European economies by splitting production into 42 industries (including 16 service sectors) and examining the complex interactions between these industries, their relationships with the wider economy, and the trade of goods and services across the EU members and with global markets.
The analysis makes extensive use of the E3ME model and its detailed databases. E3ME is based on the European System of Accounts (ESA95) and provides the necessary sectoral disaggregation in each of the EU27 member states. It is therefore ideally suited for industry level analysis and can capture inter-industry effects that would not be present in more widely-available macroeconomic models. E3ME is made up of 28 equations, covering the components of GDP, the labour market, prices, energy and material demands, with separate behavioural relationships for each industry and region estimated using robust econometric techniques. The historical database covers the period 1970-2006 and the model produces annual forecasts to 2030. More information about E3ME can be found here and, with appropriate training, the model is available for licensed use.
Tools and competence
CE specialises in the application of detailed sectoral modelling covering the whole economy and distinguishing the separate member states in the EU in order to gain an improved understanding of the nature of structural change in the European economies and the potential impact of sectoral policies. Specifically we offer:
- a long-standing reputation for sectoral modelling, having its origins in the work of the nobel laureate Richard Stone whose work underpins the international system of national accounts
- the E3ME model, one of Europe's leading macroeconometric models with substantial sectoral detail
- our experience in using E3ME to produce forecasts and policy scenarios for the European economies
- our knowledge and experience in studying sectoral change in Europe
Review of the Energy Taxation Directive
European Commission (DG TAXUD)
This study had two objectives: firstly to develop various options to restructure the minimum levels of taxation for energy products and electricity as set out in the Energy Taxation Directive leading to a development of various policy scenarios; and secondly to assess the economic, social, environmental and energy impacts of such policy options for EU27 member states by means of macro and micro-economic modelling.
CE used E3ME to model the Europe-wide economic and environmental impacts of different energy taxation regimes. The modelling work involved producing a baseline projection to 2030, supplemented with detailed energy tax rates, which drew upon data from the DG TAXUD databases and other recognised sources. Scenarios were then developed within the E3ME modelling framework to assess the impact of various policy options over the period up to 2030. The scenarios were based on three core options: maintaining or increasing the values of minimum levels of taxation; removing distortions to competition between energy products that current minimum levels of taxation could generate; and, lastly, dividing the minimum levels of taxation into environmental and energy components. Scenarios were also designed that met the other objectives of the study, namely, the analysis of the effects of removing tax distortions between different fuels and between different consumers of fuels. CE's modelling also addressed the interaction of the Energy Taxation Directive with the EU ETS and other EU instruments as this was important in assessing the issue of double taxation.
Petre
Anglo-German Foundation
This project aimed to build upon the work in the COMETR project by looking at the competitiveness effects of environmental tax reform in the UK and Germany. E3ME was used in tandem with the GINFORS model (a global econometric model) to analyse the impacts of environmental tax reform on the Foundation's three core themes of its general research topic (‘Creating Sustainable Growth in Europe’), namely: innovation, productivity and growth; environment and resources; and welfare, employment and social justice. The project website is http://www.psi.org.uk/petre/.
Updating the IA TOOLS Energy-Environment Model Inventory Database
European Commission (DG JRC - IPTS)
This project was carried out on behalf of the Institute for Prospective Technological Studies, part of the European Commission's Joint Research Centre. It involved the update and revision of the model inventory part of the IA TOOLS database, which provides a description and assessment of the various quantitative economy, energy and environment modelling tools used in Europe to the Commission services.
The project was split into two tasks: the first of these was to update the information held within the database to take into account recent developments and new modelling tools and the second was to provide recommendations for changes to the structure of the database, including new chapters on data collection and input-output analysis and better links to other parts of the IA TOOLS database. A key part of the work was the collection of detailed technical information and the presentation of this in a way that allowed comparison between the modelling tools involved and was accessible to users within the Commission who may not have an in-depth experience of modelling.
Medium-term forecast of the supply of skills
in Europe
European Commission (CEDEFOP)
This project developed a methodology for forecasting the supply of skills at the EU member state level for the European Centre for the Development of Vocational Training (CEDEFOP). Using the E3ME model Cambridge Econometrics (CE) provided short and medium-term forecasts for labour market participation in different demographic groups, based on an agreed macro-economic forecast. CE worked in collaboration with the Institute of Employment Research (IER) at the University of Warwick, and the Research Centre for Education and the Labour Market (ROA) at the University of Maastricht, who used these forecasts to produce projections of skills supplies. The work built on a previous project carried out by the same team for CEDEFOP, which considered skills requirements from a demand perspective. In both projects close collaboration with national experts in each of the member states was a element of the project so that the final forecasts were consistent across the EU while also taking into account local expertise. The robustness of the final projections was tested by varying a number of key macro-economic indicators and assessing the sensitivity of each skills group to these inputs.
Evaluation of a personal cap and share scheme
in Ireland
Comhar Sustainable Development Council
This project evaluated the feasibility and macroeconomic impacts of a proposed ‘cap and share’ scheme in the Republic of Ireland focused on emissions from fossil fuels, particularly those from road transport. The project required the development of a base case and the modelling of a number of alternative scenarios, with results presented for the macroeconomic and sectoral impacts. The project also required analysis of the distributional impact on households.
CE’s role was to estimate the macroeconomic impacts using the Eire component of its energy-environment-economy model for Europe (E3ME). The work involved comparing the business as usual projection to 2020 against those for the various scenarios (main cap and share scheme, CO2 tax alternative and a hybrid) and sensitivities. Another element of the work involved the use of distributional household income and expenditure data to assess the distributional impact on households.
MATISSE
Research Directorate General, European Commission
The objective of MATISSE was to achieve a step-wise advance in the science and application of Integrated Sustainability Assessment (ISA) of EU policies. In order to reach this objective the core activity of the MATISSE project was to improve the tool kit available for conducting Integrated Sustainability Assessments. E3ME is seen as one of these tools and provides a key input to the energy-environment modelling from the perspective of economic and technical progress. In addition the model was expanded to include an assessment of physical material demands and this was integrated into its existing E3 structure, allowing two-way interactions between the economy, the environment and demand for energy and material inputs.
The project website is http://www.matisse-project.net/projectcomm.
Development of macro and sectoral economic models
aiming to evaluate the role of public health externalities in society
(DROPS)
Research Directorate General, European Commission
The project aimed to provide a full-chain analysis related to impact of health protection measures related to priority pollutants as identified by the Environment and Health Action Plan (EHAP), to support the development of cost-effective policy measures against pollution-related diseases and their wider impacts. The project achieved this by extending and developing existing methodologies, models and data to provide an impact-pathway-based model for evaluation of the role of public health externalities on society. The project objectives were related to the following pollutants: ozone, heavy metals (mercury, cadmium, arsenic, nickel, lead), polychlorinated biphenyls (PCBs), dioxins and indoor air pollution. The main deliverables from the project included evaluation of a number of emission scenarios using a cost-benefit analysis and incorporating macro-economic modelling. The project made use of the E3ME model to run scenarios to assess the economic impacts of European-level abatement strategies for the pollutants. Key variables investigated at the macro level included GDP, employment, and competitiveness (productivity, international trade, etc) while sectoral and population distribution effects were also covered to incorporate the potential for burden-sharing between groups. The project website is http://www.nilu.com/drops
Economic, social and environmental impacts of
possible changes to the EU Emissions Trading Scheme
Environment Directorate General, European Commission
This project provided analytical and modelling support to the European Commission through an assessment of the economic, social and environmental impacts of possible changes to the EU Emissions Trading Scheme (EU ETS). The objectives were twofold: to support the European Commission in its consideration of proposed modifications to the Directive 2003/87/EC that established the EU scheme for emissions allowance trading in January 2005 and, secondly, to provide the technical, practical and legal framework for any changes in the Directive that the Commission might wish to present to the European Parliament and Council.
The list of modifications to the EU ETS considered were: first the expansion
of the scope of the Directive to cover, for example, small installations
and other installations, and to other sectors and gases; second, changes
in the allocation mechanism moving away from grandfathering of allowances
to auctioning and benchmarking and modification in the treatment of
new entrants and closures and the extent of harmonisation envisaged;
third, changes to the rules for setting the total quantity of allowances;
and lastly alterations to the rules for compliance, enforcement and
verification and mutual recognition of verifiers between member states.
The project addressed the main problems revealed during the operation
of the Scheme over 2005-06 including the lack of a stable and/or gradually
increasing emissions allowance price that would give a clear incentive
to cost-effective CO2 reduction across the EU.
Study on the Economic and Cultural impact, notably on co-productions, of territorialisation clauses of State Aid schemes for films and audio-visual productions
Information Society and Media Directorate General, European
Commission
This major study was undertaken by a consortium led by CE for the Information Society and Media Directorate, the Competition Directorate, the Market Directorate and the Taxation Directorate of the European Commission. It was designed to inform the EU's regulatory review of film production support by public bodies in the 25 EU member states. It analysed the economic and cultural impact of those direct public subsidies that were paid to EU film producers in member states and that had national or regional localised spending conditions attached to them. This included industry co-productions where film subsidies were paid by more than one state to a consortium of producers drawn from different states. The justification for such subsidies is that local cultural and employment objectives can be addressed only by relaxing those EU competition rules that forbid discrimination by spatial area through the application of the so called 'territorialisation clauses'. New regulations in this area were to be agreed by the EU and the member states following this study, drawing on the experiences from the existing application of the territorialisation agreements. The consortium that undertook this reflective study was led by Cambridge Econometrics and included Ramboll Management, David Graham & Associates and an international legal team and local experts. The study involved primary collection of information from film bodies and producers, with analysis undertaken within a comprehensive economic and cultural framework designed to illuminate understanding of the economic and cultural role that they play. The study assessed the legal provisions relating to territorialisation, analysed the subsidies that were in effect paid in the 25 member states, assessed how the economic structure of a country affected the application of territorialisation subsidies, and assessed whether territorialisation was an obstacle to European co-productions. The analysis was complemented by interviews with a representative sample of stakeholders, which were also used to evaluate what the cultural consequences might be of removing territorialisation from film subsidies.
Medium-term forecast of occupational
skill needs in Europe
CEDEFOP, European Commission
This project, for the European Centre for the Development of Vocational Training (CEDEFOP) developed a medium-term forecast of occupational skill needs in Europe, based on available comparative data and covering each of the EU25, plus Norway and Switzerland. E3ME was used to produce a detailed 42-sector projection of employment in each country and, using this, occupational demand and skills requirements were estimated by the Institute of Employment Research (IER) at the University of Warwick, and the Research Centre for Education and the Labour Market (ROA) at the University of Maastricht. E3ME was also used to assess key uncertainties in the projections, such as rapid increases in energy prices or a slowdown in world growth.
R&D Scenarios
Joint Research Centre Directorate General, European Commission
This project analysed the effects of increased R&D spending across Europe in the context of the Lisbon Agenda. The E3ME model was used to assess the macroeconomic and industry-specific impacts of increased R&D spending in each of the EU-25 countries over the period 2005-20. A number of model runs were carried out using E3ME, to reflect different scenarios for R&D spending. The baseline case assumed that R&D as a share of GDP remained constant over the period 2005-20; other scenarios assumed that the Lisbon targets (R&D equalling 3% of GDP by 2010) or similar national targets were met.
Links between the Environment and
the Economy and Jobs
Environment Directorate General, European Commission
This study provided estimates of the number of jobs and the value of the related economic activity that is dependent on the environment in Europe, and explored the factors behind these links. It covered all economic activity for which the environment is an input into production or an output to the market, whereas earlier studies had typically adopted a more narrow definition covering waste, waste water, and air pollution control as the main areas, and contaminated land remediation and monitoring and instrumentation as other, less significant areas. The project was led by GHK Consulting Ltd and also includes the Institute for European Environmental Policy (IEEP).
Competitiveness Effects of Environmental Tax
Reforms (COMETR)
Tax Directorate General, European Commission
This EU Sixth Framework, policy-oriented research project had as its objective the aim of assessing the short and long-term costs of environmental tax reform. The project undertook a comprehensive sectoral analysis of green tax reforms from an ex-post perspective based on actual experience rather than uncertain ex-ante expectations. A modelling framework (bottom-up and macro-economic) was developed in the study, augmented by detailed case studies of existing tax reforms that have already been implemented in the EU and candidate countries in Eastern Europe. Short-run impacts were examined by a conventional bottom-up modelling framework. Meanwhile a more dynamic modelling framework was developed using CE's E3ME model to examine both the short and long-term effects with particular emphasis on competitiveness. Inter-industry and other indirect effects were captured as well as those international competitiveness effects which cannot be readily accounted for using the bottom-up approach.
Sector Futures Articles
European Foundation for the Improvement of Living and Working Conditions
The work involved preparing three articles on six separate sectors (childcare services, hotels and catering, chemicals, performing arts, defence industry, biomedical health sector). The three articles focussed, respectively, on analysis of trends and drivers; analysis of existing/on-going foresight research; policy issues and major challenges. In addition, a dossier was supplied synthesising the most recent and relevant data with a clear and comprehensive list of references, including annotated comments on the main features and quality of the sources on these sectors. The articles were published on the web portal of the European Monitoring on Change as Sector Futures.
Impact of EU enlargement on growth and employment
in Germany and selected European countries
German Ministry of Economic Affairs
The project was commissioned to enable the German government to better anticipate the political and economic effects of allowing in-migration from the A8 countries from 2012. Post enlargement in May 2004, Germany opted, along with most other Member States, to continue with restrictions imposed on free movement of labour from the new members, a policy that will end in 2012. Three Member States (the UK, Ireland and Sweden) opted for an open-door policy that allowed complete freedom of entry. Along with the other partners, CE took part in a critical evaluation of studies published following the 2004 enlargement and the open door policy to in-migration adopted by the UK government, and placed this within the contextual differences between the UK and German economies.
Implications of national CO2 targets in the Portuguese
economy and the power sector
Energias de Portugal
This study used E3ME to investigate the effects of implementing the three Kyoto protocol mechanisms for the economies of Portugal and the Iberian peninsula, with a detailed scenario analysis of the implications for value added, employment, and competitiveness both at a macroeconomic level and for individual industries. The Kyoto agreement includes three flexible mechanisms to help achieve the targets for the internalisation of environmental costs and the assessment of taxation, namely an Emissions Trading Scheme (ETS), Joint Implementation (JI) and the Clean Development Mechanism (CDM). The study was designed to support EDP in its strategic assessment of the current and future position of the Portuguese economy with respect to CO2 reductions under alternative policies, and of the likely effectiveness of the national government's current strategy, compared with targets to 2020. Four scenarios were constructed, after consultation with EDP, focusing upon various issues related to the achievement by Portugal of the Kyoto target for the emissions of greenhouse gases (GHGs) in 2008-12 (ie no higher than 27% above the 1990 baseline) as set by the EC Burden Sharing Agreement. All scenarios assumed that the Kyoto target was met, such that shortfall by 2008-12 would be covered by the government purchase of CDM credits from an international carbon fund to ensure compliance. The scenarios were assessed against high and low world economic growth futures, although in the former, the projections for key macro economic variables for Portugal were assumed to be broadly in line with the latest official projections submitted to the European Commission under the Growth and Stability Agreement. The aim of this two-tier approach to scenario construction was to identify the extent to which the costs of achieving the Kyoto target depended upon factors that were not under the direct control of the national government.
Emission Allowance Trading Schemes in Sweden
Environmental Accounts, Statistics Sweden
This project undertook an analysis of the impact on the economy and on environmental emissions of the introduction of CO2/greenhouse gas emission (GHG) allowances for Sweden using the E3ME model. The analysis compared the effects of carbon taxes with those of tradable emission allowances, and the effects of grandfathering versus auctioning of the allowances. The study also examined the implications of alternative methods of recycling the tax/allowance revenues, noting the impacts on different parts of the economy and the extent of any ancillary environmental benefits associated with the GHG emission reductions. The project was undertaken in close collaboration with the Environmental Accounts team of Statistics Sweden, who contributed to the design of the scenarios to model emission allowance schemes and the incorporation of the latest available Swedish Environmental Economic Accounts.
TRANSUST
Research Directorate General, European Commission
The objective of this research was to gather evidence on which economic structures are able to support economic welfare in the long run without creating burdens on social, economic and environmental resources. The project developed a network of excellence that provides a communication platform for researchers and modellers to share information about existing models in a peer review, assess the comparative advantages of various models designs, and identify research tasks for modelling sustainable economic structures. Particular attention was paid to technological change, risk perception and co-benefits. The project had an emphasis on dissemination of results with the publication of 9 working papers through its duration, two workshops, one conference and the publication of a book as a final output.
Socio-Economic Analysis and Macro-modelling of
Adapting to Information Technologies in Europe (SEAMATE)
Information Society and Media Directorate General, European Commission
This project analysed the overall economic impact of Information Society Technologies (IST) within the context of the EU and national policies. It made estimates, for the first time at an EU level, of the socio-economic impact of IST on the EU-15, Norway and Switzerland founded on a dynamic macroeconomic analysis covering the EU countries and Switzerland with detailed treatment of industrial sectors. It assessed the impacts on industry and on households. The project, which lasted for two years, built on, what was at the time rather limited, work which has been done at the national (UK, Australia) and international (IMF, MULTIMOD) level. It was undertaken by a consortium of eight institutions across Europe. CE's role was as co-ordinator for the overall project as well as in leading the work focused on macroeconomic modelling for the individual economies in Europe using E3ME. The research included an analysis of the interplay between a broad range of technologies and the socio-economic structure of the EU regions, separating the social and economic impacts of IST and then modelling the consequences of these impacts on different sectors of western European economies.
TIPMAC
Energy and Transport Directorate General, European Commission
TIPMAC was a project developed by a consortium of macroeconomic and transport models of Europe whose objective is to assess the role of transport in macro-economic development and employment. The methodology was to perform two parallel analyses. In one analysis, a transport model for the EU, the SCENES model was linked to the E3ME model to perform a number of transport scenario analyses. In the other, the ASTRA model ran similar scenarios, to provide an independent source of results and a regional economic assessment.
As E3ME provides a fully dynamic macroeconomic analysis of the EU (including individual industrial sectors), the different implications of transportation cost changes for different sectors can be identified. E3ME also provides consumer spending and results on spending by different household social groups, so that equity and welfare impacts could be studied. The SCENES model provided the detailed model of the transport sector that is lacking in previous macroeconomic analyses. The main model development tasks were to match the accounting and zonal structures of the data in the two models. The SCENES model provided transport price/cost information for input into the E3ME model, while the E3ME model provided economic demand information for input into the SCENES model. Thus the macroeconomics were based on a much more comprehensive modelling procedure than is found in transport models, while the transport sector analysis was in much greater detail than has been found in other macroeconomic studies.
Structural funds in sustainable development
Regional Policy Directorate General (A3 Evaluation Unit),
European Commission
The main project objective was to assist in integrating sustainable development objectives into regional policy objectives, through improvement in the design and delivery of Objective 1, 2 and 3 Programmes and selected Community Initiatives, funded by the EU Structural Funds.
Within this objective the E3ME modelling exercise generated scenarios with which to compare the actual economic performance of the regions and the performance of 19 sub-regions (mainly countries) in the area. The E3ME macroeconomic assessment followed a demand side and supply side modelling approach in which investment by country and by sector drove economic activity and environmental change throughout the period under study 1986-2006. The results of the study presented indicators for a counterfactual scenario. The sustainable development indicators used were based on the European Commission's 'Structural Indicators' work. The selected sustainable development measurements were adapted using the available outputs from E3ME. The estimates were based on assumptions and sensitivity analysis, especially relating to the environmental change attributable to the structural funds.
Full Text: 
http://www.camecon.com/suite_economic_models/e3me/Docs/CE_Chapter_v7.doc
DG EcFin Sectoral Analysis Project
Economic and Financial Affairs Directorate General, European Commission
In 2001 a two year contract with the European Commission produced a macroeconomic forecast and analysis report. The study provides information on expected sectoral change up to the year 2005, at both the Member State and the EU level. In addition, the report, answers key questions such as:
- In which sectors are output and employment growth most likely to come in the medium term, and which sectors are expected to decline?
- How are sectoral specialisations likely to change across Europe and in the Member States?
- What are the main drivers acting on the different sectors across Europe that cause these trends to emerge?
- How sensitive are these views to changes in the world outlook, in particular the slowdown in world activity?
- What are the likely sectoral effects of other events currently happening, or likely to happen in the near future, such as EMU, EU Enlargement, the development of e-commerce, and post-Kyoto environmental strategies for Greenhouse Gas Abatement?
As a result of this project E3ME was upgraded to cover 40 industrial sectors across 19 European regions while new forecasts and equation estimation were performed. A new revised version of the user-friendly E3ME front end (E3ME 3.03) was also an output from this project.
See
executive summary (pdf 104kb)
DG Environment Waste Management Project
Environment Directorate General, European Commission
The objectives of the study were to provide an overview of existing studies on environment and employment and to undertake a critical analysis of the employment effects of waste management policies. Sectoral projections of the total employment effects from waste management policies were produced using the E3ME model. Using case study analysis from earlier in the project, direct (net) sectoral employment estimates were made. Alongside this, an estimate, again on the basis of case study analysis, was made of the average wage associated with the change in employment. New investment may be needed to improve waste management techniques to conform to legal standards. There may also be a requirement to use different fuel or material inputs which will in turn reduce waste from the production process. All these input changes can be accumulated to provide an estimate of the direct impact on gross output (by sector), and this can be fed through the model to provide the indirect effects by use of the model's input-output structure. From the increase in output, new employment will be generated as well as investment. The income generated by the new employment will raise incomes and lead to increased consumers' expenditure. The model is designed to simulate these interactions until a new, stable, solution is reached across all the Member States. The end results of the simulations were the total employment effect of the waste management policies, relative to a baseline situation of no policy action. The employment effect comprised of the initial direct effect plus any indirect effects brought about through investment and consumers' expenditure, and their resulting knock-on effects in other parts of the economy.
The E3ME project
European Commission
The two-year project Industrial Benefits and Costs of Greenhouse Gas Abatement: Applications of E3ME was successfully completed in January 2000. Working papers for each of the nine project tasks have been produced to present in detail the work carried out. In the second half of 1999, a full endogenous solution for all 19 E3ME regions was produced for the requirements of the various application tasks. A stylised emission permit-trading scheme was also introduced and emissions data were extended to cover other, non-CO2, gases.
The results of the project confirmed findings of other empirical work that significant reductions in GHG emissions via a shift in taxes from labour to pollution are not likely to reduce European GDP or employment. Permit trading schemes limited to the energy and energy-intensive industries, combined with carbon taxes for other fossil fuel users, could benefit the economy without serious loss of industrial profitability if the permits are nearly all allocated ("grandfathered") to industries in the first few years of the schemes. Estimates were made of ancillary benefits of mitigation (see below). The associated task on consumption sustainability also concluded that a 10% increase in taxes on energy consumption on households causes CO2 emissions to fall by 1.6% in the short run and by 2.8% in the long run.
One of the outcomes of the project was a paper presented to an OECD/IPCC Expert Workshop on 'Assessing the ancillary benefits and costs of GHG mitigation strategies' held in Washington DC, March 27-29 2000. The paper, by Terry Barker and Knut Einar Rosendahl, estimates the health and mortality benefits of GHG mitigation in Europe using E3ME to simulate the effects of multilateral carbon taxes and emission permit schemes to achieve the Kyoto target for the EU, allowing for 6 GHG emissions over the period 2008-2012. Three alternative mitigation scenarios that meet the Kyoto targets are explored: multilateral carbon taxes, a grandfathered CO2 emission-permit scheme, and a combination of policies. The necessary tax rates or permit prices are 135 to 154 euros (2000) per tonne carbon.
The net impact on GDP is quite small, less than 1% from base in all scenarios. Indeed, in two of the three scenarios the GDP effect is positive. Chart 1 shows the effects on the growth rates of GDP (rather than the levels) and the rates of inflation. The effects on inflation are also small with inflation higher in all the scenarios, with the fully grandfathered permit scheme implying the highest price rises. Chart 2 summaries the overall effects on emissions in the mixed-policies scenario: here the Kyoto target is met for GHGs, with substantial further reductions below baseline in all other pollutants included in the model. The costs from the emissions of NOx, SO-2 and PM10 in each EU country are included in E3ME using damages estimated in the ExternE study, a substantial assessment of the external costs of electricity generation in Europe funded by the European Commission. The projection of damage costs to 2010 shows a dramatic fall due to expectations of large target reductions in emissions of NOx and SO2 this fall is taken into account in the ancillary benefit calculations.
In all the scenarios, the estimated ancillary benefits by 2008-12 are
about 9bn (1990) euro per year, i.e., about 138 euro (2000) per tonne
reduction in carbon-equivalent or 0.11% of total GDP. They represent,
each year, a saving of around 104,000 life-years, 11,000 fewer new
incidences of chronic bronchitis in adults, and 5.4 million fewer restricted
activity days. These benefits constitute 15-35% of the change in GDP
brought about by the mitigation policies, showing the importance of
including ancillary benefits in the overall assessment of mitigation
policy, even though emissions of NOx and SO2 are expected to fall significantly
by 2010. The paper is to be published by the OECD.
The paper 'Macroeconomic impact of micro-scale combined heat and power' was presented in a seminar to the ENER (European Network for Energy Economics Research) in Brussels, 4-5 May 2000, by Poul Erik Grohnheit, Risø National Laboratory, Denmark. The paper is a product of the task, ‘Incentives for Industrial Energy Efficiency’ within the project ‘Industrial Benefits and Costs of Greenhouse Gas Abatement: Applications of E3ME’. The paper uses a combination of bottom-up and top-down energy models to assess the market potential and economic impact of the availability and promotion of micro-scale CHP technology. In the optimisation, bottom-up model CHP generators are treated as stylised agents who are serving a given demand at minimum cost either by own-generation or by purchase of electricity from outside. Data for the electricity markets for the EU Member States are based on the PRIMES reference scenario from the Shared Analysis project.
The results of the bottom-up analysis show a substantial shift in electricity generation from large-scale coal-fired plant to small- and micro-scale gas-fired CHP. The shift is reflected in the heat supply from fossil-fired boilers to CHP. These results, which show significant variations among the European countries, are translated into input to the macroeconomic model, E3ME. The input consists of differences in investment volumes in different sectors and the corresponding differences in purchase of electricity and fuel use.
High Oil Prices and European Markets
CE Internal research
In early March 2000 the oil price rose above $30 per barrel, up from
an average of just $11 during January 1999. Such a sudden increase
in energy prices had a major impact on fuel demand and environmental
emissions for the different fuel users in the European Union member
states. Although oil prices later fell back somewhat, due to an increase
in supply, increasing oil prices have been a feature of the global
economy since 2000.
In response, CE used E3ME to conduct a preliminary study on the effects of large oil price increases on the structure of the European economy, energy markets, environmental emissions and regional development up to 2010. The results of the analysis suggest there are marked differences among EU member states in their responses to a sustained oil-price rise. While the core economies appear to cope reasonably well traditionally peripheral countries such as Spain, Greece and Portugal see the largest reductions in GDP.
For more information contact
Hector Pollitt
Project Manager - European Modelling
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