Moving towards a 30% carbon reduction target in the EU
Economic impacts in Slovakia

In this study we perform a quantitative economic analysis of the impacts on the Slovak economy of the EU tightening its climate target from a 20 to a 30% reduction in greenhouse gas emissions by 2020 as compared to 1990. The main aim of the study is to assess the costs and benefits of meeting a more stringent climate target accruing to different players in the Slovakian economy, with a sectoral breakdown of these costs. Using statistical data (Slovstat, EU ETS Registry) and forecasts (PRIMES/GAINS), a broad macro-economic analysis was performed to assess the likely impacts not only on the electricity and industrial sectors but also on welfare more generally, including budgetary revenues and benefits accruing from abatement of associated pollutant emissions.

The overall conclusion is that the -30% target can be met without any additional direct costs to the Slovak economy. The direct costs are approximately the same as under a 20% target. The modelling effort in this study indicate that overall the -30% policy target for 2020 is about € 5 million cheaper than the -20% target. The higher abatement costs under a -30% scenario are mitigated by greater fuel savings in industry and the electricity sector, higher auction revenues for the government and the higher value of the substantial amount of banked credits that companies hold. In this way, the direct costs and direct benefits of the -30% scenario exactly outweigh each other.

This study identified a number of substantial indirect benefits associated with the -30% target. The required additional investment of € 0.7 billion between 2009 and 2020 could raise GDP by about 0.7% in 2020. Other additional benefits anticipated are improved air quality and a reduction of dependency on fuel imports. Although industry will be faced with higher costs, these are most likely to be passed through to consumers. This will result in a loss in market share for industry. It appears that the loss in value added by energy-intensive sectors more or less equals the benefits accruing from higher investments.

publication

Authors CE

Sander de Bruyn
Dagmar Nelissen

Delft, September 2011