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 Central Report covers the results of the key policy scenarios on the EU-ETS design regarding allocation and the CBAM. It also includes some key sensitivity analyses on trade assumptions, climate policy ambition in major trading partner countries, extension of the CBAM to indirect emissions thereby replacing national schemes for compensating electricity prices from ETS, and (for GEM-E3) on the use of government revenues.
