Macro Economy

Iconneg_Economy

Energy efficiency (EE) actions can lead to better macroeconomic performance, as measured by employment, output (GDP) and the public budget.

The investments needed to bring about improvements in EE may boost employment in the short run, if undertaken when the economy operates at less than full capacity. In addition, better EE may also lead to higher overall productivity in the economy, e.g. through improved health. This would affect also long-run employment. These mechanisms leading to increased employment would also boost output.

EE improvements also have effects on the public budget. While public investment or subsidies imply higher public spending, there is also potential for cost savings with improved EE in the public sector. In addition, the employment and output effects mentioned above bring about an increase in tax revenue.

These effects occur on the macro level of the economy, and as such are the result of interactions in many different markets through changing relative prices. To fully capture these interactions requires the use of macroeconomic models. We will make use of short-run (business-cycle) as well as long-run (CGE) macroeconomic models to quantify these effects.

 

Available documents from this Work Package

Literature review on macroeconomic effects of energy efficiency improvement actions (D6.1)