Modelling the Effects of the EU Emissions Trading System in Poland: A Comparison Between IO And CGE Results

As a number one Europe’s coal generator, Poland is the European Union (EU) member state mostly affected directly by European green policies. In this context, this paper aims to measure the impact of the EU Emissions Trading System on the Polish economy. Additionally, we compare the results based on two different methodologies – Input-Output model and Computable General Equilibrium model. To the best of our knowledge this is the first time when these approaches are directly compared in this context. Our results show the same directions and general conclusions in both methodologies; however, the IO approach may overestimate the impact of carbon tax on national economy and the emissions. We find that while IO simulations predict a reduction in emissions between 5.13% and 8.77%, CGE model indicates that expected fall in emissions oscillates between 1.24% and 2.32% only. Sectoral analysis shows however, that the differences in results are not necessarily linear.