Macroeconomic effects of efficiency policies for energy-intensive industries: The case of the UK Climate Change Agreements, 2000–2010 ☆ Terry Barker a, ⁎ , Paul Ekins b , Tim Foxon a a Cambridge Centre for Climate Change Mitigation Research (4CMR), Department of Land Economy, University of Cambridge, 22 Trumpington Street, Cambridge CB2 1QA, UK b Policy Studies Institute (PSI), 50 Hanson Street, London W1W 6UP, UK Received 2 July 2006; received in revised form 14 December 2006; accepted 26 December 2006 Available online 20 February 2007 Abstract This paper reports a study modeling the UK Climate Change Agreements (CCAs) and related energy- efficiency policies for energy-intensive industrial sectors. Bottom–up estimates of the effects of these policies are introduced into the energy-demand equations of a top–down dynamic econometric model of the UK economy with fifty industrial sectors, MDM-E3. This allowed estimation of the effects of the reduced energy use for the outputs from the sectors, i.e. the reductions in unit costs of the energy-intensive industries, on the demand for their outputs (both in the UK and in the export markets). The model is solved as a counterfactual 2000–2005 and as a projection 2005–2010 in a series of scenarios to allow estimation of the effects of the policies on inflation and growth, as well as on overall energy demand and CO 2 emissions. The system-wide final energy reductions is estimated to be 4.2 mtoe, or 2.6%, of total final demand for energy by 2010, including a rebound effect of 19%, with negligible effects on inflation and a slight increase in economic growth through improved international competitiveness. © 2007 Elsevier B.V. All rights reserved. JEL classification: E12; O52; Q43 Keywords: Climate Change Agreements; Energy-efficiency; Macroeconomic effects; Top–down/bottom–up modeling Energy Economics 29 (2007) 760 – 778 www.elsevier.com/locate/eneco ☆ Contribution to the Special Issue of Energy Economics on “Modeling of Industrial Energy Consumption”. ⁎ Corresponding author. Tel.: +44 1223 764874. E-mail address: tsb1@cam.ac.uk (T. Barker). 0140-9883/$ - see front matter © 2007 Elsevier B.V. All rights reserved. doi:10.1016/j.eneco.2006.12.008