How Economic Analysis Can Inform the Climate Change Policy Debate: The Case of Northern Ireland

Abstract

SummaryThis article aims to illustrate policy issues surrounding attempts to develop greenhouse gas (GHG) mitigation policy in a small region – Northern Ireland – with a relatively large agri‐food sector of strategic economic importance. A common difficulty faced by many regions is that proposals to legislate mitigation targets may not be based on a technically and economically feasible strategy to deliver emission reductions at reasonable economic cost. We demonstrate the contribution that economic analysis can make to promote and inform discussion of the economic and environmental trade‐offs. We consider critically proposals to adopt similar GHG mitigation frameworks as other parts of the UK, in particular taking account of the interdependency of different sectors in the regional economy. A regional Computable General Equilibrium model is used to analyse the impacts of policy shocks designed to reduce GHG emissions in the absence of mitigation technology adoption. We conclude that in a small open economy, without the adoption of feasible technology, there is a risk of serious damage to agri‐food competitiveness with relatively limited economy‐wide environmental gain, leading to trade diversion and GHG emission leakages. Great care is needed in regional GHG policy design, based on robust evidence, so as not to over‐promise and to balance environmental and economic implications.