News Source & Photographer: School of Management and Economics

Editor: News Agency of BIT

Translator: Xu Yunlei, News Agency of BIT

Professor Wei Yiming's team from the Energy and Environmental Policy Research Center of BIT has made important progress in the research of energy disruption in Russia and Europe. "Carbon emissions and economic impact of EU's embargoing Russian fossil fuels" was published in Nature Climate Change in the form of an analysis. This is the seventh article published by Professor Wei Yiming's team in Nature since 2017. Professor Wei Yiming's team, young teacher Liu Lijing pre-hired associate professor as the co-first author of this paper. The paper was selected as a Featured Article by Nature Climate Change.

Fig.1 This article is selected as a featured article

The Ukraine crisis has exacerbated geopolitical frictions and triggered turmoil in global energy markets. Given Russia's important position in the global energy market, concerns are growing about possible future disruptions of Russian energy supplies. Since CO2 emissions mainly come from the combustion of fossil fuels, energy disruptions will inevitably have an impact on greenhouse gas emissions. At a critical time to achieve the goals of the Paris Agreement, it is essential to measure the environmental impact of this important geopolitical event.

In response to this problem, most of the existing relevant research focuses on local impacts on energy-importing countries or Russia, and the analysis of global economic impacts that includes spillover effects is very limited. To this end, this study simulates and discusses the potential impact of energy disruptions in Russia and the EU and possible crisis responses in the EU, and conducts a series of uncertainty analyses for individual energy commodity disruptions, labor market differentiation settings, and trade substitution effects.

Studies show that if the EU embargoes Russian fossil fuels (especially oil and gas), the economies of both Russia and Europe and the rest of the world will be damaged, and global GDP will be lost by 0.5%-0.8% in the short term. Production and consumption in the EU, especially in energy-intensive industries, will be negatively affected, with GDP falling by 1.5–2.5% in 2022. The EU's total fossil fuel consumption will decline significantly due to a significant increase in domestic fossil fuel prices (12-20% for oil and 39-64% for gas), resulting in a 12.3-18.3% drop in CO2 emissions. Since Russia is heavily dependent on oil and gas revenues, a reduction in Russian exports will have a more severe impact on the economy, with a GDP loss of 3.7–5.5% in 2022. While demand-side responses within the EU will further reduce its CO2 emissions while mitigating its GDP losses, the world will still suffer some economic losses. In addition, the disruption of the global free trade order triggered by the embargo could have other effects.

Fig.2 The impact of energy disruptions in Russia and Europe on GDP and CO2 emissions in various regions of the world

The research tool used in this study is the Global Energy and Environmental Policy Analysis Model (GEEPA), an economic module in the China Climate Change Integrated Assessment Model (C3IAM) independently designed and developed by Professor Wei Yiming's team. The C3IAM model couples the Earth system model with the socio-economic system, is a key tool for assessing climate policy, and is the only comprehensive global assessment model selected by China as the Sixth Assessment Report of the United Nations Panel on Climate Change (IPCC AR6). GEEPA is a global multi-regional recursive dynamic computable general equilibrium model, which not only covers the changes of global economic growth, industrial structure, investment consumption, energy consumption and other socio-economic factors, but also can be used to measure the impact of economic activities on the environment by introducing greenhouse gas and pollutant emission modules, including environmental emissions, radiative forcing, temperature rise, etc.

Fig.3 Overall framework of C3IAM/GEEPA

Paper link: https://www.nature.com/articles/s41558-023-01606-7