Assessing the socioeconomic impacts and public policy costs of the transition in carbon-intensive regions

This deliverable consists of two research papers that focus on the assessment of the socioeconomic and the public policy costs of the low carbon transition in carbon-intensive regions through different methodological approaches.

Europe has committed to turning climate neutral by 2050 in a just and socially fair way. The low-carbon transition entails a transformation of all production and consumption processes in a capital-intensive and skill-demanding way that can increase regional challenges. The first study aims at exploring the spatial implications of the EU carbon neutrality pathway by assessing the socioeconomic impacts at the regional (NUTS2) level. We do this by employing GEM-E3-R, a hybrid Computable General Equilibrium model, to perform a scenario analysis of the Fit-for-55 package and towards climate neutrality in 2050. In addition, we assess the macroeconomic contribution of the established Just Transition Fund by incorporating in detail the demand and employment opportunities generated by the associated JTF measures.

In the second study, we systematically analyse all countries with coal phase-out pledges globally, and find that more than half of these countries have ”just transition” policies which compensate negatively affected actors. Compensation is larger in countries with more ambitious coal phase-out pledges and most commonly directed to national or regional governments or companies, with a small share going directly to workers. Globally, compensation amounts to over $200 billion (uncertainty 163-258), with about half provided internationally, mostly through Just Energy Transition Partnerships and the EU Just Transition
Fund. Our findings highlight that the socio-political acceptance of coal phase-out has a tangible economic component which should be factored into assessing the feasibility of achieving climate targets.