Carbon emissions and economic impacts of an EU embargo on Russian fossil fuels

The Russia-Ukraine conflict lays bare the dependence of the European Union (EU) on fossil fuel imports from Russia. Here, we use a global computable general equilibrium model, C(3)IAM/GEEPA, to estimate CO2 emission and gross domestic product (GDP) impact of embargoing fossil fuels from Russia. We find that embargoes induce more than 10% reduction of CO2 emissions in the EU and slight increases of emissions in Russia, while both regions experience GDP losses (around 2% for the EU and about 5% for Russia, ignoring the relative impact of other sanctions). Reacting to increasing energy prices with demand-side response inside the EU would increase CO2 emission savings, while turning GDP losses into gains. Implementing a partial embargo with tariffs largely compensates for lost government revenue. An EU embargo on Russian fossil fuels would lead to a rapid decrease in fossil fuel combustion, GHG emissions reductions and potential economic losses. This analysis quantifies such effects, while also demonstrating how demand-side responses could offset the negative shock.