Economy-wide impacts of socio-politically driven net-zero energy systems in europe

Abstract

Net-zero energy system configurations can be met in numerous ways, implying diverse economic effects. However, what is usually ignored in techno-economic and economy-wide analysis are the distinct social-political drivers and barriers, which might constrain certain elements of future energy systems. We thus apply a model ensemble that defines social-political storylines which constrain feasible net-zero configurations of the European energy system. Using these configurations in a macroeconomic general equilibrium model allows us to explore economy-wide effects and ultimately the cost-effectiveness of different systems. We find that social-political storylines provide valuable boundary conditions for feasible net-zero designs of the energy system and that the costliest energy sector configuration in fact leads to the highest European-wide welfare levels. This result originates in indirect effects, particularly positive employment effects, covered by the macroeconomic model. However, adverse public budget effects on the transition to net-zero energy may limit the willingness of policymakers who focus on shorter time-horizons to foster such a development. Our results highlight the relevance of considering the interaction of energy system-changes with labor, emission allowance and capital markets, as well as considering long-term perspectives.