The effects of a stricter climate policy on the economy of HungaryPublished: 1 of September, 2011

For some years now there has been a heated debate in the European Union about whether it is enough to reduce emissions of greenhouse gases by 20% from their 1990 levels by 2020, or should they be reduced by 30%. With the publication of Roadmap 2050 the debate about the reduction target for GHGs by 2020 seemed to have died down, as Roadmap sets no target values to be achieved by 2020. However, it presents the idea of a 25% reduction target for the first time, also providing a possible scenario for increasing burdens placed on member states gradually. The proposed 25% abatement was approved at the meeting of environment ministers of European Union member states, but Poland declared it would block the process, arguing that the European Committee’s decision is not in accord- ance with the principle of proportionality, and that emissions targets could be achieved through other, more cost-effective ways. Furthermore, Poland argued that favouring natural gas over coal goes against the non-discrimination principle of the European Union and is an intervention in the energy policy of member states. Note, that currently the only country blocking the process of European climate policy is Poland. This study looks at what effects a stricter Euro- pean Union GHG emission reduction policy would have on the economy of Hungary, i.e. what would happen if the reduction target to be achieved by 2020 were raised from 20% to 30% of 1990 levels. We look at the costs and the benefits of this in the various sectors of the economy. We also look at the 30% target proposed earlier, for this might be set as the official target in the EU, provided that an international treaty with developed countries outside the EU is concluded.