Assessing macro-economic effects of climate impacts on energy demand in EU sub-national regions

Energy demand is rising globally and future climatic conditions are likely to change the demands for different energy carriers required for different sectors of the economy. European policy makers are increasingly interested in having a more detailed spatial representation about the future macro-economic impacts coming from these climatic shifts in the energy consumption patterns. In this work we try to meet these policy needs by carrying out a macro-economic assessment of energy demand impacts at the sub-national level for the EU regions. We use the Inter-temporal Computable Equilibrium System (ICES) model, a neoclassical CGE whose regional coverage has been extended to the sub-county NUTS2 and NUTS1 EU regions. To control for climatic and socio-economic uncertainty we have examined nine RCP-SSP combinations. As inputs for the CGE assessment we have included twelve types of energy demands impacts consisting in three carriers (oil, gas and electricity) times four sectors (agriculture, industry, services and residentials). Results shows that negative macroeconomic effects may not be negligible in regions located in Southern Europe. By 2070 especially in SSP5-RCP8.5 and SSP3-RCP4.5 these negative effects can be bigger than 1% of GDP with a peak of -7.5% in Cyprus. The analysis also shows the importance of mitigation policies to reduce the adverse macro-economic effects.