Energy, Climate Change & Environment

This Policy Report assesses various options for EU climate policy utilizing a quantitative trade and environment model. The authors investigate the EU’s 2030 emission reduction target, evaluate the impact of the newly introduced Carbon Border Adjustment Mechanism (CBAM), and analyze different climate coalitions with the EU at their core, including the recently launched “G7-led Climate Club.” Thereby they assess the impact on both national and global emissions accounting for carbon leakage, on international economic competitiveness and changes in the global market shares of the EU, as well as on aggregate income gains and losses.

Climate change has an effect on all areas of development in poor countries due to its impact on the agricultural sector. The EU development policy should support innovative financial mechanisms for family farms and work towards the opening of product markets and the free movement of people.

A joint energy and climate action policy could save European countries EUR 248 billion by 2050. This is the result of a study simulating different scenarios. In the worst-case scenario, the total costs could reach EUR 8.629 trillion.

Russia’s invasion of Ukraine in February 2022 led to gas supply in Europe dropping significantly, shaking the EU out of its complacency regarding energy procurement and consumption habits. The costs of going green on top of more expensive energy are putting a strain on European competitiveness, with higher energy prices hitting the chemical, steel and metal processing industries in countries like Germany, Spain or Poland particularly hard.