Energy efficiency (EE) actions can lead to better macroeconomic performance, as measured by employment, output (GDP), the public budget and other economic indicators.
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.
Modelling
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, COMBI two types of models: an input-output-model for assessing short-run (business-cycle) impacts as well as a computable general equilibrium (CGE) model to assess long-run macroeconomic models to quantify these effects.
Results
In the short run, the positive macro-economic stimulus on the economy caused by the COMBI initiatives is substantial; we estimate 0.9 per cent of EU’s GDP and a positive effect on the labour market of about 2.3 mn job-years. However, this stimulus will only materialise in countries with idle resources in 2030 that can support further growth (negative output gap, situation of economic downturn). In 2018, about half of the EU28 Member States are expected to have a negative output gap.
In the long run, CGE (Computable General Equilibrium) modelling does not show significant impacts on employment and even slightly negative impacts on GDP. However, energy efficiency will still lead to a reduction in CO2 emissions and significantly lowered carbon allowance and fossil fuel prices, which, given all EU countries are net fossil fuel importers will also improve their terms of trade.
Available documents from this Work Package
Literature review on macroeconomic effects of energy efficiency improvement actions (D6.1)
Methodology and quantification: Macro-economic impacts of energy efficiency (D6.4)
