Towards a safe and just operating
space for EU agriculture

New Open access Article from BrightSpace in Renewable and Sustainable Energy Reviews

European green bonds, carbon tax and crowding-out: The economic, social and environmental impacts of the EU’s green investments under different financing scenarios

Authors: Z. Smeets Křístková, H.D. Cui, B. Rokicki, R. M’Barek, H. van Meijl, K. Boysen-Urban

Published: Available online 9 January 2025 / Renewable and Sustainable Energy Reviews Volume 211, April 2025, 115330

Abstract

This study provides novel insights into the economic, social and environmental impacts of green energy investments in the European Union using MAGNET, a computable general equilibrium model of the world economy. MAGNET was extended to include sector-specific investment allocation, investment risk premiums adjustment, and technology learning effects to endogenize productivity growth in renewable and bioenergy sectors. In line with the proposals on climate neutrality and the Green Deal, the study simulates an increase in investments in renewable energy and bioeconomy sectors (additional 15 % increase in capital stock) starting in 2025. Three alternative financing scenarios are compared; the European Green Bonds scenario, carbon tax scenario and the crowding-out scenario (assuming green investments are financed from existing resources). It is found that additional green energy investments bring generally positive GDP, social and emission-saving effects. In the case of GDP, the deviation from the baseline reaches +0.9 % in 2050 for the EU if financed from the Green Bond. The other scenarios show that when green investments are not crowding-out other investments in the EU, the economic impacts at EU level are still positive. It is also shown that, on average, the investment policy would increase the size of bioeconomy sector by between 3.2 % and 4.2 % in 2050. However, the impacts across particular countries and industries are very heterogenous.

Keywords: Green energy investments; Macroeconomic impacts; Bioeconomy sectors; Emissions; technology learning; Crowding-out; CGE modelling; European green bonds

Read the full article here: https://doi.org/10.1016/j.rser.2025.115330

Acknowledgements

Funding was provided by the European Commission’s Joint Research Centre (on the technical development of the investment module), the Dutch Ministry of Agriculture, Nature, and Food through the Knowledgebase Program 34: Circular and Climate Neutral; KB1Cd and the Horizon Europe 101060075 BRIGHTSPACE project (Designing a Roadmap for Effective and Sustainable Strategies for Assessing and Addressing the Challenges of EU Agriculture to Navigate within a Safe and Just Operating Space) (https://brightspace-project.eu/).

Cite this article

Z. Smeets Křístková, H.D. Cui, B. Rokicki, R. M’Barek, H. van Meijl, K. Boysen-Urban,
European green bonds, carbon tax and crowding-out: The economic, social and environmental impacts of the EU’s green investments under different financing scenarios,
Renewable and Sustainable Energy Reviews, Volume 211, 2025, 115330, ISSN 1364-0321,
https://doi.org/10.1016/j.rser.2025.115330.
(https://www.sciencedirect.com/science/article/pii/S1364032125000036)

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