Climate Change Mitigation and Policy Spillovers in the EU’s Immediate Neighborhood

By Serhan Cevik, Nadeem Ilahi, Krzysztof Krogulski, Grace B Li, Sabiha Mohona, Yueshu Zhao

December 1, 2023

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Format: Chicago

Serhan Cevik, Nadeem Ilahi, Krzysztof Krogulski, Grace B Li, Sabiha Mohona, and Yueshu Zhao. Climate Change Mitigation and Policy Spillovers in the EU’s Immediate Neighborhood, (USA: International Monetary Fund, 2023) accessed December 21, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

EU’s neighborhood countries (EUN) have lagged the EU on emissions mitigation; coal-heavy power generation and industrial sectors are a key factor. They have also trailed EU countries in emissions mitigation policies since 2000, with little use of market-based instruments, and they still have substantial fossil fuel subsidies. Increasingly stringent EU mitigation policies are asociated with lower emissions in EUN. Overall output effects of the CBAM, in its current form, would be limited, though exports and emissions-intensive industries could be heavily impacted. A unilaterally adopted economywide carbon tax of $75 per ton would significantly lower emissions by 2030, with minimal consequences for output or household welfare, though a safety net for the affected workers may be necessary. To become competitive today by attracting green FDI and technology, overcoming infrastructure constraints and integrating into EU’s supply chains, EUN countries would be well served to front load decarbonization, rather than postpone it for later.

Subject: Carbon tax, Climate change, Climate policy, Environment, Greenhouse gas emissions, Taxes

Keywords: Carbon emissions, Carbon tax, Climate change, Climate change mitigation, Climate policy, EU mitigation policy, EUN country, Europe, Global, Greenhouse gas emissions, Neighborhood country, Policy spillover

Publication Details

Pages:

39
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2023/246
Stock No:

WPIEA2023246
ISBN:

9798400259401
ISSN:

1018-5941

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