Modelling the health related benefits of environmental policies - a CGE analysis for the eu countries with gem-e3



20

Table 4: Policy variables and relative prices

Model without Feedback

Model with Feedback

CO2
domestic
tax

Reduction
of social
security
rate

Real
wage
rate

Terms of
trade

CO2
domestic
tax

Reduction
of social
security
rate

Real
wage
rate

Terms of
trade7

(ECU95/
tonne
CO2)

% change in 2010 w.r.t. baseline

(ECU95/
tonne
CO2)

% change in 2010 w.r.t. baseline
scenario

Austria

147.5

5.79

1.71

0.58

149.5

5.93

1.78

0.59

Belgium

24.1

2.09

1.18

0.23

24.3

2.24

1.27

0.22

Germany

0.63

0.35

0.30

10.6

0.78

0.44

0.29

Denmark

64.2

3.24

1.38

0.46

64.6

3.30

1.42

0.46

Finland

L7^

0.11

0.25

0.11

17

0.12

0.26

0.12

France

40.0

1.88

0.93

0.00

37.8

1.81

0.93

0.00

Greece

4.7

1.29

1.03

0.33

4^9^

1.35

1.08

0.35

Ireland

46.5

4.37

L95^

0.18

46.1

4.36

1.95-

0.18

Italy

166.1

11.70

5.66

0.70

166.1

11.81

5.73

0.69

The Netherlands

28.2

2.13

1.08

-0.03

27.0

2.19

∏4^

-0.04

Portugal

13.3

1.76

ΓT9^^

0.08

12.8

1.82

1.25

0.07

Spain

60.1

5.16

2.32

0.98

59.4

5.16

2.34

0.97

Sweden

79^

0.40

0.33

0.04

8.Ô"

0.41

0.35

0.05

^UK

12~

0.06

0.47

0.32

Ï.5"

0.11

0.52

0.34

"EU

37.3

2.99

∏4^

1.78

40.2

3.06

1.20

1.79

Table 4 also presents the terms of trade effect. Previous research indicates that
this is an important element in the explanation of the double dividend that can be
realised by CO
2 taxes in the EU (see, for example, de Mooij (1999) and Proost and Van
Regemorter (1998)). However, in our exercise it does not play a major role in
explaining the difference in impacts between the two models, as the terms of trade
effect hardly changes between the two versions of the GEM-E3 model.

Table 5 summarizes the impact of the domestic CO2 taxes on the emissions of
NO
x, SO2, VOC and PM at the EU level. The difference between the two models is the
result of the different CO
2 reduction targets that are imposed.

For the individual countries the terms of trade are computed relative to all trading partners, whereas for
the EU as a whole the terms of trade are computed relative to outside EU trading partners.



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