Welfare implications of EU Effort Sharing Decision and possible impact of a hard Brexit

In this paper, we evaluate the recent developments of European climate policy from the perspective of the 2030 and 2050 European commitments. Using the general equilibrium model GEMINI-E3, we analyze the European Effort Sharing Decision proposed in July 2016 and evaluate its cost per member state by 2030. We then simulate its possible extension to 2050 applying a non-cooperative meta-game approach that has been proposed to assess European burden-sharing issues. Considering the Brexit referendum that took place in June 23, 2016 in the United Kingdom, we analyze different possible scenarios of British participation in the European climate policy. We show that Brexit could have a significant negative impact on the United Kingdom's climate-policy cost and a relatively negative effect on the remaining twenty-seven EU member states.