Cambridge Econometrics completes ground-breaking two-year project for DG Energy

Improving the tools that economists use to analyse decarbonisation policies leads to better-informed policy.

CE is therefore proud to have led a ground-breaking series of studies for the European Commission (DG Energy) to improve the way that macroeconomic models are used to assess the economic impact of decarbonisation.

Up until now, analysis of the macroeconomic impacts of decarbonisation policy has typically lacked explicit consideration of the roles played by innovation and the availability of finance as drivers and facilitators of the transition. One aim of the project was to rectify that.

Combined outputs of the project, comprising ten reports, include:

  • a review of technological and innovation-focused policy interventions and how these might impact on the economies across the EU in a low-carbon future
  • a mapping exercise showing the sources of finance for clean energy investment in the EU, with recommendations for how to incorporate such findings in existing macroeconomic models
  • a case study examining the resilience of the EU economy to energy supply shocks and a comparison with other global regions
  • the results of new econometric analysis exploring how easily energy use in production can be reduced by substituting capital and labour
  • a case study exploring current and expected comparative advantages of clean energy EU industries and to test potential benefits for the EU from early action.

The project also developed a new model to simulate future technology transformations in the European residential heating sector (called FTT:Heat), designed to be integrated with an existing macroeconomic model.

It simulates the uptake and replacement of heating technologies by households in all 28 EU Member States and assesses their macroeconomic implications.

Context

EU Member States have committed to making a 40% cut in greenhouse gas emissions compared to 1990 levels by 2030, but different pathways to achieve this goal can have different economic consequences, which the modellers seek to estimate.

The €1 million-euro, two-year project took a collaborative approach bringing together economic modellers and specialists in finance and innovation from different schools of economic thought, from across Europe.

The project outputs can all be found on DG Energy’s website here.

For further information please contact 

Richard Lewney Chairman rl@camecon.com