Two types of large-scale models with different modelling philosophies are used to quantify socioeconomic effects in scenarios in which the EU moves forward in climate policy and applies different design options under the EU emissions trading system (ETS) combined with a Carbon Border Adjustment (CBAM).

One model, GEM-E3, is a computable general equilibrium model that follows neoclassical theory, while the other model, GINFORS-E, is a macroeconometric model that follows a post-Keynesian approach. The results of both models suggest that an effective CBAM plays a significant role in reducing the risk of carbon leakage. The key results on trade, production and emission effects also show, by and large, little quantitative variation between the two models, in spite of their different philosophies.   

This Technical Report documents firstly how the two models have been harmonised as far as possible in terms of external assumptions on, e.g., global population, GDP development and on energy prices, so that the differences in results in the later, policy related, scenarios are indeed related to model differences, and not simply to different key assumptions.

This is followed by exploratory scenario runs that address the impact of the EU moving forward versus the case that global uniform CO₂ prices achieve either a 2 degrees, or a 1.5 degrees climate policy goal.