“Macroeconomics of the Energy Union” study reports: Thematic Area #3 – Megatrends

To deliver the low-carbon transition, each sector of the economy – energy, industry, agriculture, waste, land-use – will need to find ways to reduce their GHG emissions to zero. There are different pathways that get to net-zero emissions depending on the availability and uptake of key technologies and associated changes in human behaviour. Still all pathways have one thing in common: the substantial shift in activities between economic sectors. Sectors involved in fossil-fuel production will see a loss in demand, while those that produce energy efficiency equipment will see an increase.

To assess these shifts and pathways all together, macro-economic models are used. Modeling exercises however tend either to compare the effects of the low-carbon transition to a ‘business-as-usual’ baseline case, in which current trends in the economy persist until 2050, or benchmark against one of the broad Shared Socioeconomic Pathway (SSP) scenarios, the framework used by the IPCC. While this approach is useful for identifying the potential impacts of the low-carbon transition, it implicitly assumes that economic structures will remain largely unchanged.

In this report we test this assumption, design, and run scenarios that consider and compare the futures of certain transitions or mega trends, which may take place simultaneously with the energy transition.

The 4 megatrends considered are:

➡️ technological change
➡️ globalisation
➡️ demographic change
➡️ resources use

E3ME and GEM-E3-FIT are both macro-economic models which come from different theoretical backgrounds, giving contrasting results, which offers a rich and robust understanding of the megatrends and their potential impacts on the economy.

Two overarching findings of the analysis:

💡 The effects of the low carbon transition on GDPand employment are likely to be smaller than some of the megatrends. In some cases, the low-carbon transition may in fact help offset certain other negative impacts.
💡 The EU economy needs to become more flexible and resilient to changes brought forward by the megatrends and the energy transition.

Read the full report here 👉 https://lnkd.in/dCVxTHqf