OECD Technical Expert Workshop on Modelling the Impact on Circular Economy and Low Carbon Transitions of the Covid-19 Recovery Packages

1. Center for Global Trade Analysis
Department of Agricultural Economics, Purdue University
403 West State Street, West Lafayette, IN 47907-2056 USA
contactgtap@purdue.edu
http://www.gtap.agecon.purdue.edu
Global Trade Analysis Project
Environmental Implications of the Covid-19 and
Low-carbon Policies in the Post-Covid World
Maksym Chepeliev and Dominique van der Mensbrugghe
Center for Global Trade Analysis, Purdue University, USA
Technical Expert Workshop on Modelling the Impact on Circular Economy and Low
Carbon Transitions of the Covid-19 Recovery Packages
OECD and European Commission
13-14 April, 2021

2. • Modelling framework:
• Dynamic CGE model ENVISAGE + GTAP MRIO Data Base.
• 21 regions and 27 sectors from GTAP V10A Data Base.
• 2014-2030 baseline.
• World Bank Macro and Poverty Outlook (MPO) projections from Fall 2020 extended with SSPs.
• Covid-specific shocks:
• Increase in the costs of imports across all sectors and regions.
• Sharp drop in international tourism.
• Shift in the households’ demand away from services that require close in-person interactions (hotels,
restaurants, public transport, etc.), toward other goods and services.
• Disruption of the logistics of food distribution implemented via increasing cost of agricultural and food
commodities.
• Shift from (air) transportation toward communication services used by service sectors.
• Reduction in the global oil prices (in 2020 relative to 2019) by increasing the supply of oil
1. Modelling the Covid-19 pandemics and beyond
2

3. 2. Impacts of the Covid-19 on emission pathways and NDCs in 2030
3
-5.7 -6.1
-3.8
-8.1
-4.6
-7.3
-1.3
-2.5
-5.2
-2.9
-3.8
-24.0
-4.6
-1.1
-2.5
-8.6
-10.2
-5.0
-13.9
-20.1
-16.0
-9.8
-35
-30
-25
-20
-15
-10
-5
0
-35
-30
-25
-20
-15
-10
-5
0
NDC
w.r.t.
baseline
in
2030,
%
Change
in
emssions
w.r.t.
bseline
in
2030,
%
Change in CO2 emissions due to Covid in 2030, % w.r.t. per-Covid baseline
NDC target w.r.t. pre-Covid baseline, %
2.9
-2.2
0.7
-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
Carbon leakage, %
EU Green Deal carbon leakage, %
Reduction in carbon leakage due to CBAM, %
EU Green Deal + CBAM, %

4. 3. EU Green Deal & CBAM: Impacts for EU trading partners in 2030
4
-0.14
-0.04
-0.39
-0.94
-0.88
-0.16
-0.07 -0.08
-0.36
-0.08
-0.23
-1.0
-0.8
-0.6
-0.4
-0.2
0.0
0.2
Change
in
real
income,
%
EU Green Deal CBAM EU Green Deal + CBAM

5. 4. EU Green Deal & CBAM: Implications for EU producers in 2030
5
-1.7
-46.4
-18.5
-1.4 -0.9 -1.2 -1.5
-7.6
2.5
0.6 1.3
-2.7 -1.9
7.4
0.2
-4.2
-0.6
-50
-40
-30
-20
-10
0
10
Change
in
output,
%
EU Green Deal CBAM EU Green Deal + CBAM

6. 6. EU Green Deal & CBAM: Implications for EU imports in 2030
6
9.9
9.2
40.0
92.6
4.8
58.1
18.0
20.5 19.7
6.6
20.4
63.5
14.6
0.8
3.3
7.3
0
10
20
30
40
50
60
70
80
90
100
-80
-70
-60
-50
-40
-30
-20
-10
0
10
20
30
Imports-to-output
ratio,
%
Change
in
imports,
%
EU Green Deal CBAM EU Green Deal + CBAM Imports-to-output ratio, %

7. • What are driving policies post-Covid? Recovery—mostly income
transfers, structural (e.g. infrastructure) or ‘greening’… Does it matter?
• Will post-Covid policies be driven by new concerns regarding the
dependence on supply chains?
• Long-term drivers
• Rapid growth in China and East Asia  rising competitiveness of alternative suppliers. Belt and
Road Initiative.
• Trade war and its aftermath, regional trade agreements (CPTTP, RCEP)
• Diversification (e.g. semi-conductors)—also driven by climate change due to extreme weather
events
• How to model non-price driven changes in import preferences?
7. Discussion: shaping the baselines in the post-Covid world
7

8. Center for Global Trade Analysis
Department of Agricultural Economics, Purdue University
403 West State Street, West Lafayette, IN 47907-2056 USA
contactgtap@purdue.edu
http://www.gtap.agecon.purdue.edu
Global Trade Analysis Project
Thank you!