The macroeconomic implications of financing investments with climate-related fiscal revenues

Report - December 6, 2022

This report presents the macroeconomic implications of different co-financing schemes for climate and non-climate investments. The scenarios include an assessment of different financing, trade and climate-related fiscal revenue recycling conditions, using the E3ME and the GEM-E3 macroeconomic models. First, we explore the effects of a co-financing of planned climate investments in the EU in the 2021-2027 period. Second, we expand the analysis to include additional investments in digitalisation, healthcare and education in the 2021-2027 period. In both cases, the investments are financed through government borrowing and are repaid from the EU-ETS and CBAM revenues. Third, as sensitivity analysis, alternative financing, trade and revenue recycling options are introduced to explore their marginal impact.

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