This project concerns the study of policy issues in the energy/environment domain with the help of the GEM-E3 model, a full scale general equilibrium model for the 15 EU-countries that represents energy/environment issues in a consistent economic framework. The policy issues include the role of innovation for a sustainable growth in Europe, the phasing out of nuclear power, trade and environmental effects of the enlargement of the Union to Eastern Europe and the fine tuning of the Kyoto policies. The modular structure of the model allows studying the compatibility of national policies and the benefits and costs of centralised EU-policies. The model maintenance and model refinement research cover the extension to Eastern Europe, the full implementation of previously decided extensions (inclusion of Switzerland, integration of bottom-up modelling for the electricity sector, integration of imperfect competition) and a further development of the modelling of innovation and R&D strategies.