Denise Van Regemorter

The double dividend and the role of inequality aversion and macroeconomic regimes

The introduction of the European Communitys carbon-energy tax in a small open economy is analyzed by comparing two kinds of revenue recycling. We use a dynamic general-equilibrium model with different regimes for the labor market, several income groups, and a crude valuation of environmental benefits. This allows for a more comprehensive empirical test of the double-dividend hypothesis, including equity aspects. It is shown that the weak double-dividend hypothesis can fail when equity aspects are taken into account.

Debt management in a small open economy: A theoretical and an empirical study for Belgium

Abstract This article analyzes the effects of debt management and its consequence for the control of base money in a small open economy (Belgium). The study compares the effects obtained from a small theoretical model with the results of a larger empirical model. The theoretical model focuses on the financing of government by money operation, on the bond rate, and on the international reserve of the Central Bank. The empirical model is a medium-term one, including the demand and the supply sectors of the economy and permitting simultaneous analysis of real and financial variables. The effects of an endogeneous or exogenous debt management have been studied by numerical simulation of modification in the public expenditure, the world trade, and the discount rate.

Are there cost-efficient CO2 reduction possibilities in the transport sector? Combining two modelling approaches

To determine the real cost of CO2 emission abatement in the transport sector is difficult because this sector is characterised by many market inefficiencies. There are important negative externalities that are addressed by inefficient instruments like fuel taxes. First, a transport model is used to estimate the effect on transport flows of a better internalisation of the other externalities like congestion, accidents and the emission of non-greenhouse gases by switching from fuel taxes to road pricing. Technological progress will make this switch feasible. Next, the new transport flows are used as inputs in a partial equilibrium model for the energy sector to estimate more correctly the cost effective contribution of the transport sector in the national CO2 reduction required. It is shown that, under these conditions, the potential for cost effective CO2 reductions in the transport sector is very limited.

Testing the Double Dividend Hypothesis for a Carbon Tax in a Small Open Economy

In this paper, we analyse the introduction of the proposed EC energy-carbon tax in the tax and transfer system of a small open economy like that of Belgium. The European energy-carbon tax can be considered as an international agreement of the minimum national tax type.1 In order to reach the stabilization of emissions promised by the EC in Rio de Janeiro, all EC-Member States have agreed to introduce a national carbon tax of a given magnitude in their tax system but can decide themselves on the use of the extra tax proceeds.

Limiting air pollution from transport: economic evaluation of policy options for the European Union

Policies addressing air pollution from transport have in the past mainly focused on SO2, NOx and VOC through vehicle emission and fuel quality regulation. More recently however, CO2 emissions and particulates have come on the agenda because of global warming and the perception of the major role of particulates in health damage. This shift is also reflected in the last proposed directive by the European Commission and the European Parliament and in the agreement between the European Commission and the Auto Industry. The objective of this paper is first to evaluate the impact of the new policy proposals and, secondly, to look at a policy combining these new policy proposals with a tax reform aiming at more neutrality between fuels in terms of environmental damage. The analysis uses the PRIMES transport model in combination with the PRIMES refinery model, in order to assess both the energy demand impact and the supply impact of the proposed policies.

Internalisation of Externalities

The internalisation of external effects is an important policy guideline in the Energy and Environmental policy at EU level. The objective of this chapter is to evaluate the macroeconomic and welfare impacts of a policy aiming at applying this guideline to the externalities generated by energy consumption. It will also contribute to a comparison of an integrated policy approach towards air compared to a policy addressing only the global warming issue. In most sectors these emissions are one of the main sources of external cost. A policy scenario will be defined in which an environmental cost is applied on the emissions in proportion to the damage generated by these emissions.

The Role of Accompanying Policies

The emission-constrained cases impose additional costs to all producers and consumers. This additional cost, being necessary to reach the target, depends on the equilibrium shadow cost per unit of emissions, which is computed at the EU level. Mathematically, the mechanism is exactly equivalent to the imposition of that level of carbon tax (uniform across the EU) that is necessary to reach the target.

The Role of Energy Saving Investment

In this simulation the model is modified to incorporate the additional possibility of investing in energy-saving technology. In this context economic agents are assumed to have the possibility to increase the productivity of energy (i.e. consume less energy inputs per unit of output) by investing some resources to accumulate an energy-saving technology stock.

Baseline Scenario for the EU and Overview of Policy Simulations

Following the theoretical presentation of the previous chapters, a large number of simulations were carried out with the latest version of the GEM-E3 model. The main goal was to investigate the impact of reaching alternative QELROS (Quantitative Emission Limitation and Reduction Objectives) for the European Union by the year 2010. The evaluation of the impact of the environmental policy was then derived by comparing the results of the policy runs to a baseline scenario, that was again derived with GEM-E3 but under the assumption that no new environmental policy would be implemented in the EU till 2010.

Definition of Policy Instruments and Criteria for their Assessment

Curbing GHG emissions could invoke a considerable burden on the economy. Consequently, any environmental policy plan must rely on a careful design of the instruments through which the environmental goal is to be reached. Given the variety of instruments that can be considered, it is necessary to categorise them in a systematic way. A unified set of criteria for the evaluation of the effectiveness of these instruments must also be compiled.