Macroeconomics of the Energy Union (Tasks 6 & 7)

Abstract

To better understand the links between energy use and macroeconomic aggregates, such as economic growth, employment and household income, and estimate its impact, the Commission initiated a project in 2019 and its deliverables were published in November 2022 and are described here below. With the aid of 2 macroeconomic models – GEM-E3-FIT and E3ME – it analyses the connection between economic activity and energy use, as well as the interactions with other trends in the economy. The modelling activities are complemented by case studies and analysis of the scientific literature. The project is divided in 7 tasks.

Task 6: Regional and sectoral aspects of the clean energy transition. This task provide additional detail about the impact of the Energy Union transition, by adding an explicit consideration of the regional and sectoral implications. This Task analyses the fact that the regions of Europe will face different impacts from the transition; on the one hand, because of their economic structure (for example, a region which has an established coal mining sector is likely to experience negative socioeconomic outcomes from the transition), and on the other, because of their natural resource endowment (including characteristics such as physical location, topography, access to rivers, etc.). This affects the regions ability to prosper as technology shifts from fossil fuel based generation to renewables.

Task 7: Transition scenarios with the extended versions of the models. This task brings together all the work done in the previous tasks, to model a number of transition scenarios using the fully expanded versions of the macroeconomic models, E3ME and GEM-E3-FIT.