The impact of Fit for 55 on Ireland’s maritime transport sector and the macroeconomy

Abstract

AbstractThe European Green Deal aims to reduce greenhouse gas emissions by 55% by 2030 and achieve a carbon neutral economy by 2050. The ‘Fit for 55 package’ includes a suite of new regulations and taxes to promote Renewable and Low Carbon Fuels (RLFs) in the maritime transport sector. We use a Vector Autoregressive model (VAR) to forecast the impact of higher marine fuel prices during the transition to RLFs on Ireland’s maritime transport sector and the broader Irish economy. Our analysis finds that higher marine fuel prices are expected to reduce Gross Value Added (GVA) in the maritime transport sector by nearly 8% by 2050, relative to a “no-policy-change” baseline. Our results indicate that fuel price increases will not have a material impact on overall economic activity. The negative impact on real output is projected to range from 0.09% in 2025 to 1.21% in 2050. The projected decline in real exports ranges from 0.17% in 2025 to 2.29% in 2050, while consumer prices will increase from 0.13% in 2025 to 1.72% in 2050.