Analyzing the Macro-Economic and Employment Implications of Ambitious Mitigation Pathways and Carbon Pricing

Article - May 10, 2022

The European Green Deal puts forward ambitious climate targets that aim to turn the block into the first climate-neutral economy by mid-century in a fair and just way. Getting there will require the large-scale transformation of the EU and global energy and economic systems through a host of regulatory and market-based instruments.

The study responds to the need to improve how current macro-economic models capture the dynamics and challenges of the transition to climate neutrality, by enhancing the GEM-E3-FIT model in terms of energy system representation, low-carbon innovation, clean energy markets, technology progress and policy instruments.

High carbon pricing in particular is shown to have limited negative impacts on EU’s GDP and consumption and to act as catalyst of the transformation towards a capital-intensive economy by triggering increased investments in low-carbon technologies and energy efficient equipment.

Getting to well-below 2°C will modestly affect total employment. However certain sectors will suffer the most such as supply of fossil fuels and energy intensive industries, while others will receive a boost through additional jobs in low-carbon manufacturing for example, the electricity sector etc.

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