Waiting for Godot? The case for climate change adaptation and mitigation in small island states

IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.ABSTRACT: EU's neighborhood countries (EUN) have lagged the EU on emissions mitigation; coal-heavy power generation and industrial sectors are a key factor. They have also trailed EU countries in emissions mitigation policies since 2000, with little use of market-based instruments, and they still have substantial fossil fuel subsidies. Increasingly stringent EU mitigation policies are asociated with lower emissions in EUN. Overall output effects of the CBAM, in its current form, would be limited, though exports and emissions-intensive industries could be heavily impacted. A unilaterally adopted economywide carbon tax of $75 per ton would significantly lower emissions by 2030, with minimal consequences for output or household welfare, though a safety net for the affected workers may be necessary. To become competitive today by attracting green FDI and technology, overcoming infrastructure constraints and integrating into EU's supply chains, EUN countries would be well served to front load decarbonization, rather than postpone it for later.

Section: Annex 1 Methodology: Firm-level Analysismentioning

confidence: 99%

Climate Change Mitigation and Policy Spillovers in the EU’s Immediate Neighborhood

Cevik

2023

“…where 𝑦 𝑖,𝑡 denotes the logarithm of CO2 emissions in metric tons per capita or energy security measured by net energy imports as a share of GDP in country i and time t; 𝐴𝐸 𝑖,𝑡 is the share of alternative sources of energy including nuclear, renewable and other non-hydrocarbons; 𝑋 𝑖,𝑡 is a vector of control variables including the logarithm of real GDP per capita, trade openness, the logarithm of population, the share of urban population and a measure of institutional quality, which are commonly used in the literature (Narayan and Narayan, 2010;Piaggio and Padilla, 2012;Özbuğday and Erbaş, 2015;Gökgöz and Güvercin, 2018;Tajudeen, Wossink, and Banerjee, 2018;Xia and others, 2020;Cevik, 2022a;2022b). The 𝜂 𝑖 and 𝜇 𝑡 coefficients denote the time-invariant countryspecific effects and the time effects controlling for common shocks that may affect CO2 emissions and energy security across all countries in a given year, respectively.…”

Section: A Changing the Energy Matrixmentioning

confidence: 99%

Climate Change and Energy Security: The Dilemma or Opportunity of the Century?

Cevik¹

2022

Self Cite

This paper investigates the connection between climate change and energy security in Europe and provides empirical evidence that these issues are the two faces of the same coin. Using a panel of 39 countries in Europe over the period 1980-2019, the empirical analysis presented in this paper indicates that increasing the share of nuclear, renewables, and other non-hydrocarbon energy and improving energy efficiency could lead to a significant reduction in carbon emissions and improve energy security throughout Europe. Accordingly, policies and reforms aimed at shifting away from hydrocarbons and increasing energy efficiency in distribution and consumption are key to mitigating climate change, reducing energy dependence, and minimizing exposure to energy price volatility.

“…In our view, policymakers in Europe-and beyond-still have an opportunity both to achieve net zero emissions by 2050 and to strengthen economic prospects by increasing efficiency in the distribution and consumption of energy, along with changing the energy matrix from fossil fuels to renewables. As shown in Cevik (2022a;2022b), a clean energy transition in Europe by changing the energy matrix and boosting energy efficiency could bring a significant reduction in GHG emissions, strengthen energy security, and make economies more resilient to climate change.…”

Section: Introductionmentioning

confidence: 99%

Reaching (Beyond) the Frontier: Energy Efficiency in Europe

Cevik

2023

The world is not decarbonizing fast enough, with global warming on track to reach as much as 4°C over the next century absent a global green transition. Policymakers in Europe-and beyond-still have an opportunity both to achieve net zero emissions by 2050 and to strengthen economic prospects by increasing energy efficiency, along with changing the energy mix from fossil fuels to renewables. In this paper, we assess energy efficiency (or intensity) in a panel of 38 European countries over the period 1980-2021 by using the stochastic frontier analysis and obtain statistically significant and intuitive results. We have two key findings. First, price signals, including through the introduction of a carbon tax and the removal of fossil fuel subsidies, are critical for energy efficiency, as consumers respond to changes in energy prices. Second, stronger environmental policies and institutions generate unambiguous improvements in energy efficiency by inducing investment in energy efficient equipment and buildings and nudging consumers for energy conservation. These results-robust to alternative specifications and methods-have important policy implications for green growth with higher energy efficiency. ISBN