Focus on carbon leakage in the EU, the use of public funds to support adaptation and asset cost recovery under environmental regulations 

Welcome to the Spring edition of our newsletter with updates on some of our work here at Vivid Economics.

We have been engaged in wide-ranging policy and strategic analysis for UK and global clients over recent months. With EU leaders set to agree the bloc’s 2030 climate and energy goals later in the year, we performed detailed modelling of the extent of possible carbon leakage scenarios under a range of future carbon prices for a major European government. We evaluated the current criteria used by the Commission in determining whether a sector is at risk of leakage and compared these against available alternatives. In addition, we reviewed the effectiveness of the different policy options available for combating leakage.

In the UK, the Department for International Development (DFID) asked us to consider what the appropriate role for international public funds to support adaptation in developing countries might be. Taking an explicitly economic perspective, we reviewed the current state of knowledge on the costs of adaptation in developing countries and the approaches that can be taken to prioritise adaptation actions. We also examined the appropriate role of the public sector in supporting these activities and developed a framework for determining the geographic priorities for different types of adaptation spending. Our work also included a high-level briefing to senior officials prior to COP-19. You can read our key findings here.

Some of our major private work focussed on cost recovery under a variety of international environmental regulations for a major energy multinational. We developed a comprehensive framework for assessing commercial risk for specific assets and asset classes stemming from environmental regulation. The framework allows for the estimating of how the impact of each regulation on asset profitability varies with the strength of the regulation as well as the ordering of regulations by their relative impact on asset profitability.

Below you will find some of our other international work. For more details on these, or for information on our many other projects not mentioned here, please feel free to email us.