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International Monetary Fund. European Dept.

facilitates Ireland’s transformation to a low-carbon economy . The green transition will require substantial capital spending, which could boost growth and jobs during the recovery phase and help achieve EU emission reduction targets. 19 While funding from the Next Generation EU (NGEU) recovery package for capital spending will provide helpful additionality, Ireland’s cumulative share of the NGEU’s Recovery and Resilience Facility (RRF) grants of 0.2 percent of GDP is small relative to projected investment needs; however, its disproportionately high share of capital

Mr. Jiaqian Chen, Maksym Chepeliev, Mr. Daniel Garcia-Macia, Ms. Dora M Iakova, Mr. James Roaf, Ms. Anna Shabunina, Dominique van der Mensbrugghe, and Mr. Philippe Wingender

concludes with a summary of the main policy recommendations. Chapter 2 The EU Objectives and Policy Framework The EU remains a global leader of the drive to reduce emissions. In March 2020, the EC proposed a European Climate Law that will enshrine the 2050 climate neutrality objective in legislation. The EC is currently conducting an impact assessment of increasing the EU emission reduction target for 2030 from 40 percent to least 50 percent compared with 1990 levels, to be completed in September 2020. The EC is also reviewing a wide range of policy instruments

Mr. Jiaqian Chen, Maksym Chepeliev, Mr. Daniel Garcia-Macia, Ms. Dora M Iakova, Mr. James Roaf, Ms. Anna Shabunina, Dominique van der Mensbrugghe, and Mr. Philippe Wingender
This paper aims to contribute to the debate on the choice of policies to reach the more ambitious 2030 emission reduction goals currently under consideration. It provides an analysis of the macroeconomic and distributional impacts of different options to scale up the mitigation effort, and proposes enhancements to the existing EU policies. A key finding is that a well-designed package, consisting of more extensive carbon pricing across EU countries and sectors, combined with cuts in distortionary taxes and targeted green investment support, would allow the EU to reach the emission goals with practically no effects on aggregate income. To enhance the social and political acceptance of climate policies, part of the revenue from carbon pricing should be used to compensate the most vulnerable households and to support the transition of workers to greener jobs. A carbon border adjustment mechanism could complement the package to avoid an increase in emissions outside the EU due to higher carbon prices in the EU (“carbon leakage”). From a risk-reward perspective, the benefits of reducing the risk of extreme life-threatening climate events and the health benefits from lower air pollution clearly outweigh the costs of mitigation policies.
International Monetary Fund. European Dept.

(subject to ETS] and the emission reduction in other sectors b; either i.2 percent under the ELI effort sharinci regulation or 50 percent under the 202’. Climate Bill. 31. Recovery policies should prioritize green investment that facilitates Ireland’s transformation to a low-carbon economy . The green transition will require substantial capital spending, which could boost growth and jobs during the recovery phase and help achieve EU emission reduction targets. While funding from the NGEU recovery package for capital spending will provide helpful additionally, Ireland

International Monetary Fund. European Dept.

quota system has been successful in balancing growth, efficiency, and sustainability in the fishing industry. However, international coordination remains critical to ensure environmental sustainability. 18 The recent agreements among North-East Atlantic coastal states on setting sustainable quotas for herring, mackerel, and blue whiting are welcome, 19 but further coordination is needed to ensure adherence to the quotas and to support the long-term management of other pelagic species. Climate change : Iceland has pledged to fulfil the EU emission reduction targets

International Monetary Fund. European Dept.
The Icelandic economy has been severely affected by the pandemic. Sharp tourism contraction and containment measures caused real GDP to plummet by 6.6 percent in 2020. A modest recovery will take hold in 2021. Recovery prospects in the tourism sector depend on control of the epidemic and progress in global and domestic vaccine distribution, spelling a challenging outlook with possibly deep medium-term scarring. Fiscal policy should continue to support the economy for now. Policy buffers accumulated over the last decade provided space for a large fiscal support and accommodated substantial automatic stabilizers. Additional stimulus is planned in 2021 to address still large slack in the economy, mitigate scarring, and provide confidence in the event of downside risks. Medium-term policies should ensure that public debt is firmly on a downward path, while limiting the drag on growth.
International Monetary Fund. European Dept.
Ireland entered the COVID pandemic with reduced vulnerabilities and high growth, especially in multinational enterprises (MNEs)-dominated sectors. The pandemic has had a highly asymmetric impact on the economy. The domestic sectors contracted by about 10 percent in 2020 and unemployment reached 30 percent at the peak of the first wave, while MNEs continued to grow strongly, driving overall GDP growth to 3.4 percent. A swift policy response has been effective in mitigating the crisis impact and protecting households and firms. The domestic sectors are expected to partially recover in 2021, with GDP growth projected at 4.6 percent. Downside risks stem from uncertainties surrounding new COVID variants, post-Brexit trade arrangements, and likely changes in international taxation.