Low Carbon Economy, 2013, 4, 51-62 http://dx.doi.org/10.4236/lce.2013.42006 Published Online June 2013 (http://www.scirp.org/journal/lce) 51 Producing a Double Dividend for the EU-27 and USA with the Macro-Economic E4M-GAIA Model: Meeting G8 80% Emissions Reduction Target Leads to Economic Growth Athanasios Dagoumas Department of European and Environmental Studies, University of Piraeus, Piraeus, Greece. Email: dagoumas@unipi.gr Received January 13 th , 2013; revised February 12 th , 2013; accepted March 25 th , 2013 Copyright © 2013 Athanasios Dagoumas. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. ABSTRACT The international negotiations concerning climate change, taken place during the UNFCCC conference in Durban at the end of year 2011, have failed to establish a new global agreement to reduce global emissions. Therefore, the G8 com- mitments on 80% reduction by 2050 seems to be the most realistic climate change mitigation framework for the time being, enhanced by the political will of the EU and USA administrations. For the needs of this paper, the G8 80% target is further extended to cover the whole EU-27 region, where the reduction commitments of the EU-27 member states are allocated based on the relevant allocation weights considered for the Kyoto Protocol obligations. This paper examines the implementation of the EU-27 and USA 80% emissions reduction target using a macro-economic hybrid model E4M-GAIA of the global economy, standing for Energy-Economy-Environment-Engineering Model of the Earth. The E4M-GAIA model, which adopts similar theoretical background with the “New Economics” school depicted mainly in the well-established Cambridge University’ E3 models, is used to implement this target and to compare it with a refer- ence scenario, where no reduction target is pursued. Both scenarios consider that impact of the financial crisis, with updated information to the end of 2010. This paper aims to provide evidence that the proper direction of a portfolio of policies including: regulation, behavioral shift, revenue recycling, energy investments, energy and carbon pricing, can lead to double dividend, namely meeting a deep reduction target and providing gains for the economy. Keywords: G8 80%; Carbon Pathways; Post-Kyoto; Double Dividend 1. Introduction The UNFCCC Conference that took place in Durban in December 2011 has postponed the agreement on a legally binding deal comprising all countries for the end of the current decade. Therefore it failed to meet the demand for urgent action, being supported by the latest evidence concerning the accelerating climate change. However there was some progress regarding the creation of a Green Climate Fund (GCF) for which a management framework was adopted. The fund is to distribute US$100 billion per year to help poor countries adapt to climate impacts The GCF can be considered a support in EU initiative in September of year 2009 to provide up to 15 billion euros per year to help developing countries fight climate change and adapt to its predicted devastat- ing consequences. Considering the failure to meet an international agreement on climate change mitigation, the G8 commitment in June of year 2009 to reduce their emissions by 80% by 2050 and to work towards keeping temperature levels from rising 2 degrees Celsius, is stand- ing as the most realistic framework for climate policies. Specific countries, such as the UK, passed new legisla- tion in 2010 to reduce its emissions by 50% by 2025. In the USA, the Obama Administration expressed its com- mitment to a new climate policy through the adoption of a number of relevant legislation and the support of green companies and investments. The EU has been active the whole decade introducing a number of green policies, such as the Emission Trading System and a number of Directives, across its Member States. Moreover it works towards the integration of its energy markets by 2015 in electricity and gas, using and further strengthening the role of the well established regulatory (ACER) and op- eration organizations (ENTSOE, ENTSOG). Considering the uncertainties produced by the finan- cial and economic crisis, any projection for a binding Copyright © 2013 SciRes. LCE