Stefan Schleicher

Implementing Europe's climate targets at the regional level

Having agreed upon a binding emissions reduction path by 2020, the EU plays a leading role in international climate policy. The EU currently pursues a dual approach through an Emissions Trading Scheme (ETS) at the EU level and also via national targets in sectors not covered by the ETS. The latter include the buildings sector, transportation, agriculture, and waste. Emissions from these sectors are mainly subject to policies at provincial and local levels. A method is presented for elaborating and implementing a long-term climate policy process up to 2030 for the regional (provincial) level. Building on regional GHG inventory data, a set of indicators for each sector is developed in order to arrive at a target path consistent with the deduced regional GHG reduction requirement. Policy measures and their implementation are then settled subsequent to this process. Quantitative regional targets are found to be a prerequisite for the formation of regional climate policy as they increase participant responsibility and commitment. A five-step process of stakeholder participation ensures effective implementation of regional climate action plans. Insights from an exemplary European region are drawn upon, and policy issues are discussed in both quantitative and institutional terms.

Modelling Sustainable Consumption. From Theoretical Concepts to Policy Guidelines

Changes in consumption processes have been recognised as important steps towards sustainable development. The aim of this paper is to give an overview of research on sustainable consumption and to sketch new approaches in economic modelling ofsustainable consumption. A special focus is given to the relationship between stocks and flows as well as consumer services as being welfare relevant. From that three different steps of modelling are proposed, where the links between material goods demand and consumer services demand as well as the stock-flow relationship can be made explicit.

Endogenous technical progress induced by CO2 reduction policies: Simulation results for Austria

Almost all model simulations of CO2 reduction policies focus on the effects of changes in the relative price of energy compared to the other factors of production caused by various energy taxation schemes. Typical results of these simulations as reported e.g. from the GREEN model of OECD show depressing effects on real GDP and upward pressures on inflation.We propose the hypothesis that these results may be biased due to an inadequate treatment of technical progress and proceed as follows: Firstly, instead of treating technical progress as exogenous we explicitly model theprice induced change of the composition of capital stock of households and producers with its effects on energy efficiency and investment demand. Secondly, we investigate to what extent adouble dividend policy which boosts CO2 reduction technologies by special programs funded by the additional tax revenues differs from the mere price induced technological changes.We implement these propositions within the framework of a macroeconometric model for Austria which emphasizes substitution between energy and capital in providing energy services for households and producers. The following results are obtained: Firstly, we indicate how misleading the GDP effects may be if they result from lower energy intensities but still maintain the required energy services. Secondly, we investigate the effects of various energy taxation policies under different compensation schemes. Instead of merely relying on price-induced technological change we strongly advocate compensation programs which provide additional incentives for implementing high efficiency energy technologies such as cogeneration equipment or buildings with improved thermal standards.

Macroeconomic and sectoral effects of energy taxation in Austria

This paper analyses the effects of energy taxation on the Austrian economy. Simulations are carried out with a linked input-output macromodel. The macroeconomic effects of an energy tax on economic growth, employment, the rate of inflation (change in the consumer price index), the budget deficit and the current account will be explained, as well as the sectoral impact on different industries.

Energy Transition in Austria: Designing Mitigation Wedges

EU climate and energy policy defines ambitious objectives for the Member States, requiring a fundamental change in energy systems. In an interdisciplinary approach, starting with welfare-generating energy services instead of energy flows, we analyse restructuring options for the Austrian energy system. We extend the concept of stabilization wedges by Pacala and Socolow and integrate technological and behavioural options into a structural energy model, complemented by an economic evaluation in an input-output analysis. We apply the energy service based approach to a transformation of the Austrian energy system that meets the EU 2020 emission targets. We estimate that this would require on average additional investment of about 6 billion € p.a. over a twelve year period. This investment allows to tap savings in operating costs (predominantly energy costs) of up to 4.3 billion € at the end of the period, when using a conservative assumption of non-rising energy prices.

Impact of Carbon Dioxide Emissions Reduction on the Austrian Economy

A linked econometric input-output (IO) model of the Austrian economy with an energy block is used in this study to assess the sectoral effects of carbon dioxide emissions reduction. The energy block and the other commodities are linked by a partitioned IO model. Energy demand is described using aggregate energy demand equations, by activities and subdemand systems of the translog type for different fuel types. The conversion of energy is modelled using an IO model of the energy sector. Measures for carbon dioxide reduction from detailed expert studies are introduced in the energy model and in the econometric model. The primary impacts are on energy demand, fuel shares and investment in new energy technologies. The simulation results of the partitioned IO model show different impacts on gross output, GDP and employment.

Modeling for insights not numbers: The long-term low-carbon transformation

Limiting global warming to prevent dangerous climate change requires drastically reducing global greenhouse gases emissions and a transformation towards a low-carbon society. Existing energy- and climate-economic modeling approaches that are informing policy and decision makers in shaping the future net-zero emissions society are increasingly seen with skepticism regarding their ability to forecast the long-term evolution of highly complex, nonlinear social-ecological systems. We present a structured review of state-of-the-art modeling approaches, focusing on their ability and limitations to develop and assess pathways towards a low-carbon society. We find that existing methodological approaches have some fundamental deficiencies that limit their potential to understand the subtleties of long-term low-carbon transformation processes. We suggest that a useful methodological framework has to move beyond current state of the art techniques and has to simultaneously fulfill the following requirements: (1) representation of an inherent dynamic analysis, describing and investigating explicitly the path between different states of system variables, (2) specification of details in the energy cascade, in particular the central role of functionalities and services that are provided by the interaction of energy flows and corresponding stock variables, (3) reliance on a clear distinction between structures of the sociotechnical energy system and socioeconomic mechanisms to develop it and (4) ability to evaluate pathways along societal criteria. To that end we propose the development of a versatile multi-purpose integrated modeling framework, building on the specific strengths of the various modeling approaches available while at the same time omitting their weaknesses. This paper identifies respective strengths and weaknesses to guide such development.

Endogeneity, exogeneity and economic policy empirical evidence on the econometrics of new classical macroeconomics

ZusammenfassungDie Neue Klassische Makroökonomik provozierte nicht nur die ökonomische Theorie, sondern brachte auch eine neue Herausforderung für die ökonometrische Methodologie im Zusammenhang mit der Parameterschätzung unter der Hypothese der rationalen Erwartungsbildung und unter dem Einfluß von Reaktionen auf Maßnahmen der Wirtschaftspolitik, vor allem aber wurde eine neue Diskussion über Kausalität, Endogenität, Exogenität und die Grenzen der traditionellen ökonometrischen Strukturmodelle initiiert.Anhand von Wiener-Granger-Kausalitätstests wird die Grenze der Aussagefähigkeit dieser Testverfahren zur Identifikation von Abhängigkeiten zwischen ökonomischen Variablen diskutiert. Mittels des datenanalytischen Verfahrens der Hauptkomponentenanalyse wird die Möglichkeit einer altenativen Parametrisierung einer ökonomischen Datenbasis demonstriert, aus der ein stochastisches Maß für die Endogenität bzw. Exogenität einer Variablen bezüglich eines Datensatzes entwickelt wird.

Deepening the scope of the “economic model”: Functionalities, structures, mechanisms, and institutions

By responding to the warning voices about the failure of mainstream economics to provide policy advice to seemingly well-known problems as manifest in the ongoing economic crises, we put forward the proposition that the majority of deficiencies in this discipline results from two self-imposed restrictions. The first restriction refers to the limited scope in the perception of economic activities by focusing mainly on reproducible goods (including services) and a very few resources, as human capital and by production reproducible capital. The second restriction results from the interwoven relationships that describe economic structures and the coordinating mechanisms which operate on these structures by postulating market relationships that quite often turn out to be too simplistic or non-existing. We propose therefore two conceptual extensions. The first extension opens up the scope of economic activity both by introducing the functionalities of well-being and an extended list of stocks and flows of resources. The second extension separates the description of economic structures from the mechanisms that operate on them, which may be market or non-market based. Furthermore we will demonstrate how these extensions can be made operational in the context of analyzing the transition of energy systems.

Scanning for Global Greenhouse Gas Emissions Reduction Targets and Their Distributions

If dangerous and irreversible climatic events are to be avoided, global average temperature should not increase by more than 2°C above pre-industrial levels. In order to achieve such a global target, a mitigation pathway has to limit global emissions to about 50 percent below 1990 levels by 2050. We want to investigate in this paper the radical change of the energy system that would be needed for entering the pathway for halving emission levels by applying a global analytical tool. A comprehensive data base with a global coverage including socio-economic data as well as data on energy and emissions has been set up. By dividing the world into six countries and regions which account for two thirds of global emissions and a region for the rest of the world we investigate in an analytical framework the key drivers and parameters of the energy system which refer to population dynamics, economic activity, energy and carbon intensity. Based on assumptions about the diffusion and convergence of these key parameters we derive implications for long-term emission reduction targets.