Estimating the Impacts of AI, Trade Policy, and the Energy Transition: An Application to Ireland

Developments in trade policy, AI, and the energy transition are shaping small open economies. This paper uses a static, multi-region, multi-sector computable general equilibrium model to assess the impacts of these forces on Ireland in the long run through three channels: (i) current tariffs and trade agreements, (ii) AI-driven productivity gains, and (iii) carbon pricing, abstracting from short-run dynamics and frictions. The findings suggest that (i) the current trade policy shocks primarily redirect trade across partners and sectors, with modest aggregate output and export effects; (ii) AI-driven productivity gains can generate strong output and export growth, particularly in knowledge-intensive sectors, while inducing significant sectoral labor reallocation and distributional implications across factors of production which needs to be managed; (iii) carbon pricing can play a key role in addressing rising energy demand from AI and offsetting emissions, by shifting production toward lower-emission activities and increasing the renewable share in electricity generation.