Addressing climate change with the necessary urgency will only be successful if climate policies are perceived as socially fair and equitable by the majority of the population. However, as recognised in the IPCC Sixth Assessment Report (AR6), energy and climate modelling still struggles to bring together detailed economic and inequality impacts of climate policies. To help reduce this gap, we link GCAM-Europe, a geographical expansion of a well-established integrated assessment model, with MEDUSA, a tool for high-resolution distributional analysis. Our analysis explores how different implementations of the European Union (EU)‘s climate policy portfolio affect various consumer groups across and within Member States. It finds that a general EU-wide carbon price, while cost-efficient, has regressive impacts, disproportionately burdening low-income Member States and households. In contrast, policies based on national plans (NECPs) are less regressive. Gender and the urban-rural dimension also play an important role, with man-headed and rural households being the most affected.
Extended abstract 3-290-26
This submission provides an ex-ante assessment of the distributional impacts of the EU Emissions Trading System for buildings and road transport (ETS2) on households across the 27 EU Member States and assess the role of the Social Climate Fund (SCF) in mitigating these impacts. Carbon pricing in these sectors is central to achieving EU climate neutrality but raises concerns about regressive effects and affordability for vulnerable groups. This presentation addresses methodological challenges in identifying low-income households affected by energy and transport poverty. The work outlined in contains two main parts: First, using the Green EUROMOD microsimulation model based on EU Household Budget Survey (HBS) and EU Statistics on Income and Living Conditions (EU-SILC) data, it estimates household level impacts of ETS2 related price increases. Based on these results, the presentation identifies population groups most exposed to ETS2. It documents substantial heterogeneity across income groups, household characteristics, and countries, driven by differences in consumption patterns, heating technologies, and transport dependence. In the second part, the presentation simulates hypothetical mitigating measures eligible under the SCF, covering both buildings and transport. Measures include direct income support, renovation strategies, replacement of fossil heating systems with heat pumps, electric vehicle social leasing and purchase subsidies, and public transport vouchers. Their distributional impacts, effectiveness in alleviating ETS2 burdens, greenhouse gas reduction potential, and cost effectiveness are compared across Member States. By jointly assessing distributional and environmental outcomes, the paper contributes to the design of socially fair and efficient climate policy packages and provides decision-makers relevant evidence to support the strategic use of SCF resources alongside the implementation of ETS2.
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Unknown authors· Eceee ... summer study proce...· 0 citations
Central banks of all countries are paying attention to how they can achieve the temperature control goal of the Paris Agreement through climate governance policies while alleviating the climate transition risks arising from such policies. The “dual carbon” goals (carbon peaking by 2030 and carbon neutrality by 2060) proposed by China have set higher requirements for current climate policies and may necessitate more ambitious measures; however, the transition risks associated with these goals cannot be overlooked. This paper constructs an environmental dynamic stochastic general equilibrium (E-DSGE) model incorporating pollution externalities, financial frictions in the banking sector and the differentiated capital adequacy ratio (CAR) requirement policy to evaluate the impact of carbon tax policies on the macroeconomy and financial stability—the so-called “transition risks”. It also discusses the effectiveness of the differentiated CAR requirement policy in mitigating such risks. The findings are as follows: (1) carbon tax policies have a significant effect on emission reduction and promote green transformation, but they cause a significant shock on banks’ net assets, threatening financial stability and generating transition risks; (2) financial frictions, by restricting banks’ loanable funds, affect capital inputs in the production sector, affect capital goods prices and increase losses in banks’ net assets, thereby amplifying transition risks; and (3) carbon tax policies combined with the differentiated CAR requirement policy can not only achieve emission reduction targets but also mitigate the transition risks caused by carbon taxes by reducing banks’ risk exposure.
Shanhua Zhang, Hao Jin, Ying Fan· Energy and Climate Managemen...· 0 citations
In light of the current climate crisis, sustainable development has become a strategic element of economic policies. This has led to the step of green finance instead of traditional financial methods, adopting an approach based on environmental, social, and governance (ESG) standards. In this context, this study examines the effects of environmental protection (ESG) on green finance. The analysis covers seven countries (Australia, Belgium, France, Germany, Ireland, Netherlands, and Sweden) that scored 85 points or higher in the ISESG 2025 global ESG ranking and covers the period 2002–2021. The cointegration test of Westerlund and Edgerton is utilized in the study. Long-term coefficients are then obtained through AMG and rCCE estimators. Green finance is measured by the share of environmental protection expenditures in GDP, while ESG uncertainty (ESGUI), inflation, and financial development are included in the model. The analysis results reveal a long-term relationship between the variables and significant heterogeneity among countries. The findings display that ESG uncertainty negatively affects green finance in Ireland and Sweden, but positively affects it in Belgium. Inflation has a negative impact on green finance only in Germany, while the supportive role of financial development is found in Ireland and the Netherlands. Therefore, analyses reveal that high ESG performance alone does not guarantee the stability of green finance, and that ESG uncertainty plays a decisive role in this process. This study is the first to directly examine the empirical relationship between country-based ESGUI and green finance, focusing on the group of countries with the highest ESG scores.
Çisem Bektur· Intraders international trad...· 0 citations
The European Union’s (EU) carbon border adjustment mechanism (CBAM) has emerged as a pivotal instrument at the intersection of trade regulation and climate policy, yet its compatibility with both World Trade Organization (WTO) law and the principle of common but differentiated responsibilities (CBDR) remains contested. This study aims to examine whether CBAM is consistent with WTO non-discrimination principles, assess its alignment with CBDR under the Paris Agreement and analyze the normative and practical tensions arising when trade-based climate measures interact with the development needs and differentiated capacities of developing countries.
This study conducts a legal and normative analysis of CBAM under WTO disciplines, particularly GATT Article I (Most Favored Nation), Article III (National Treatment) and Article XX (General Exceptions), alongside international climate law instruments including the UNFCCC, Kyoto Protocol and Paris Agreement. A cross-comparative approach is used to evaluate CBAM against other climate-related trade measures such as the EU Deforestation Regulation and US green subsidies. The study also draws on WTO case law (e.g. India-Solar Cells, US-Shrimp/Turtle), comparative tables on CBDR operationalization across regimes and illustrative evidence from Indonesia to ground the analysis in concrete developing-country experiences. Inductive analysis of policy documents, scholarly commentary and institutional reports further informs the assessment of CBAM’s strategic rationale and legal positioning.
CBAM applies a largely uniform carbon standard to imported goods without substantive differentiation based on historical emissions or developmental capacity, creating a direct normative conflict with CBDR as articulated within the international climate regime. While CBAM may be prima facie compatible with the formal non-discrimination requirements of WTO law, its uniform application results in de facto disproportionate burdens on developing countries, risks veering into green protectionism and undermines distributive equity. The study identifies a structural imbalance in which WTO trade rules operate as enforceable hard law while CBDR functions as a guiding principle, leaving climate policy legally subordinate to trade stability. Existing differentiation within CBAM primarily transitional and procedural does not amount to meaningful alignment with CBDR. Without integrating CBDR through mechanisms such as revenue allocation, exemptions for least developed countries or strengthened special and differential treatment, CBAM risks weakening rather than advancing equitable global climate action.
Existing literature on CBAM predominantly focuses on WTO compliance or economic impact, often without systematically integrating CBDR as an operative legal standard. This study fills that gap by providing a structured normative and institutional analysis of CBAM through the lens of climate justice, moving beyond formal trade compliance to examine distributive equity and the de facto hierarchy between trade and climate regimes. It offers concrete pathways for reconciling CBAM with CBDR, arguing that such integration is not merely an equity demand but a functional prerequisite for effective global climate governance. The study also contributes a comparative operationalization of CBDR across international instruments and jurisprudence, enhancing understanding of how climate principles may or may not be incorporated into trade policy.
Gita Venolita Valentina Gea, Bertrand Elyo, Ivanna Raphaella Kristinata· Journal of International Tra...· 0 citations
IAMs are increasingly being used to evaluate progress towards sustainable development goals. While the representation of SDG-relevant sociotechnical systems in IAMs has improved over the years, relatively little attention has been given to equity considerations. Accounting for unequal consequences of policies and climate change could well mean that the consequences of climate change are underrepresented in current IAMs. One element is that losses and gains are valued equally in IAMs, while there is ample evidence that the modelled representative agent’s aversion to climate damages should be valued more strongly. If this would be accounted for even at aggregate global or regional scales, IAMs would call for faster and deeper emissions cuts, corresponding with overall fairer outcomes. Climate policies in IAMs can lead to increased inequalities within regions through their unequal impact on residential energy expenditures. At the same time, the resulting reduction in global emissions can lead to progressive distributional outcomes in the long term from avoided climate damages. Corrective distributional policies beyond revenue recycling schemes remain underexplored in IAMs. Yet, we show that IAMs are well equipped to explore policy combinations that reduce regressive mitigation impacts and reinforce SDG co-benefits without sacrificing ambitious climate targets. Enabling the financial means to achieve SDGs is crucial for reducing inequality both between and within countries and also enables more ambitious climate action. In this context, equity considerations in IAMs on fairer burden sharing between rich and poor countries are incomplete without also accounting for concurrent disparities in development needs.
Extended abstract 3-288-26
While the role of energy demand reduction to meet climate objectives is increasingly considered, most scenarios do not fully reflect this potential, and only a few explore low-demand pathways. Literature reviews show that this is not only due to preferences of modellers or scenario users, but also to structural limitations of models.This analysis investigates how main energy and climate scenarios for Europe balance demand and supply-side options and how this is informing policy making, with a particular focus on the setting of EU 2040 targets.
It first focuses on a comparison and benchmark of scenarios. Eight prominent scenarios by institutions, think tanks and an NGO are selected on criteria of comprehensiveness, detail of modelling and compliance with the Paris Agreement. They are then characterised using 14 indicators that reflect their outcomes (GHG budget, fossil fuel consumption) and their use of major levers (renewables, hydrogen, electrification, reduction of consumption, carbon sinks).
These numbers are then compared to targets and thresholds drawn from reports on climate objectives and the potential of various options by the European Scientific Advisory Board on Climate Change (ESABCC). This benchmark of the relative ambition and feasibility of scenarios shows a positive correlation between demand reduction – compared to stronger reliance on supply-oriented options – and climate ambition, feasibility and robustness, providing major lessons for the EU’s 2040 target setting.
The analysis then reviews detailed assumptions on energy demand for buildings and mobility, comparing the low-demand CLEVER scenario with the Commission's S3 – one of the few providing such detail. Beyond the transparency gap in data, this comparison reveals the prevalence in a scenario like S3 of trend-based projections of activity, contrasting with CLEVER’s explicit modelling of energy services. Analysing this gap can help to inform policies about the potential of energy savings.
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