The international economics of resources and resource ... - Index of

354 C. Lutz
material-intensive to labour-intensive sectors. The magnitude of the employment
gain is influenced by the carbon price and the tax shift, the underlying energy prices
and the production loss.
The CO2 reduction is mainly reached by a reduction of energy consumption, as
substitution options are limited in the medium term. Substitution accounts for about
one quarter of the emission reduction until 2020. Especially in the power sector, but
also in transport and energy-intensive industries as iron and steel substitution of
energy carriers depends on long-term investment cycles and capital stock turnover.
The IEA (2008, p.75) reports typical lifetimes of energy-related capital stock of up to
two decades for passenger cars and about 50 years for nuclear and coal power plants.
The share of substitution of energy carriers, especially towards zero-emission energy
use, is expected to increase in the long-term after 2020. On sector level, highest
reductions in energy consumption take place in scenario S1H in iron and steel,
chemicals, non-metallic minerals and mining and quarrying.
6 Conclusions
In the course of the petrE project the GINFORS model has been applied to assess
economic and environmental impacts of ETS and ETR to reach the EU GHG targets
in the EU in 2020. Results show positive employment effects and only small
negative impacts on GDP. Economic impacts depend on the level of international
energy prices, the recycling mechanism, country specifics such as carbon and energy
intensity and structure of energy consumption.
In comparison to the results of the E3ME model (Pollitt and Chewpreecha 2009)
GINFORS is less optimistic on the economic results. One important reason is the
explicit modelling of international trade. In the case of unilateral EU action,
competitiveness of EU economies will decrease and other economies will not be
interested in new low-carbon technologies. If international cooperation is reached
later in 2010, international competitiveness could even be an advantage of EU
companies. But as global GDP will be around 1% lower, in line with figures from
the Stern (2007) review or the IPCC (2008), and transport costs will increase, overall
EU exports will also be reduced.
As every reform a major ETR in Europe will create winners and losers. On a
sector level, carbon and material-intensive industries will have to face economic
loss. On a country level, carbon-intensity but also the overall flexibility of
economies is quite important. International cooperation will reduce economic
pressure on countries and sectors, although structural change away from the
carbon-intensive industries, together with technological change, is inherent to any
successful climate mitigation policy.
ETR and ETS, if allowances are fully auctioned, are additional sources of public
revenues. The discussion on grandfathering vs. auctioning of ETS allowances
should be directed more towards this point. Countries, which give allowances away
for free, will lack money to ease structural change and invest in low-carbon
technologies.
Results should be carefully related to the EU policy debate. The project did not
search for a cost-minimal strategy. In the model simulations the single carbon price