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The Macroeconomic Implications of a Transition to Zero Net Emissions: A Modeling Framework

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dc.contributor.authorHallegatte, Stephane
dc.contributor.authorMcIsaac, Florent
dc.contributor.authorDudu, Hasan
dc.contributor.authorJooste, Charl
dc.contributor.authorBeck, Hans
dc.contributor.authorKnudsen, Camilla
dc.date.accessioned2023-03-22T14:59:46Z
dc.date.available2023-03-22T14:59:46Z
dc.date.issued2023-03
dc.description.abstractAnalyzing the macroeconomic consequences of a transition to a net-zero economy creates specific modeling challenges, including those related to the non-marginal nature of the required transformation, the role of technologies, and the replacement of fossil fuel-based assets with greener ones. To address these challenges, this paper proposes a hybrid modeling approach that starts from a set of sectoral techno-economic scenarios to construct an illustrative resilient and net-zero decarbonization trajectory. It then assesses the macroeconomic implications by linking sectoral dynamics to two macroeconomic frameworks: a multisector general equilibrium framework and an aggregate macrostructural model. This approach combines the advantages of multiple tools and captures the various dimensions of the transition, including the need to tackle simultaneously multiple market failures beyond the carbon externality. The paper illustrates this methodology with Türkiye’s objective to reach net zero emissions by 2053. The multisector general equilibrium framework suggests that the transition could contribute positively to Türkiye’s economic growth despite the large investment needs, especially when indirect mitigation benefits are taken into account and if labor market frictions can be reduced. Improved energy efficiency in the transportation and building sectors drives the growth benefits in the short and medium terms. The growth benefits depend on how transition investments are financed: if they crowd out other productive investments, the benefits are significantly reduced and can even become slightly negative in the long term. The macrostructural model focuses on implications for public debt and the current account, using two extreme scenarios in which additional investments are triggered by higher productivity or a set of budget-neutral incentives (taxes and subsidies). The model concludes that the transition would have moderate impacts on the current account and public debt. With budget-neutral incentives, there is a small increase in gross domestic product (GDP) growth, the debt-to-GDP ratio increases by 1 to 3 percent, and the current account remains unchanged thanks to the reduction in fuel imports.en
dc.identifierhttp://documents.worldbank.org/curated/en/099404203162310400/IDU0599eff88052ac04a990b738060858a1d0bef
dc.identifier.doi10.1596/1813-9450-10367
dc.identifier.urihttps://openknowledge.worldbank.org/handle/10986/39569
dc.languageEnglish
dc.language.isoen
dc.publisherWorld Bank, Washington, DC
dc.relation.ispartofseriesPolicy Research Working Papers; 10367
dc.rightsCC BY 3.0 IGO
dc.rights.urihttps://creativecommons.org/licenses/by/3.0/igo/
dc.subjectMACROECONOMIC MODELING
dc.subjectCLIMATE CHANGE
dc.subjectTECHNOLOGICAL CHANGE
dc.subjectNET-ZERO EMISSIONS ECONOMY
dc.subjectFOSSIL FUEL TRANSFORMATION
dc.subjectDECARBONIZATION
dc.subjectCLIMATE CHANGE MITIGATION INVESTMENT
dc.titleThe Macroeconomic Implications of a Transition to Zero Net Emissionsen
dc.title.subtitleA Modeling Frameworken
dc.typeWorking Paper
dspace.entity.typePublication
okr.crossref.titleThe Macroeconomic Implications of a Transition to Zero Net Emissions: A Modeling Framework
okr.date.disclosure2023-03-16
okr.date.doiregistration2025-04-07T08:14:18.544648Z
okr.date.doiregistration2025-04-08T16:06:15.318577Z
okr.date.doiregistration2025-04-09T02:46:38.775686Z
okr.date.lastmodified2023-03-16T00:00:00Zen
okr.doctypePolicy Research Working Paper
okr.doctypePublications & Research
okr.docurlhttp://documents.worldbank.org/curated/en/099404203162310400/IDU0599eff88052ac04a990b738060858a1d0bef
okr.guid099404203162310400
okr.identifier.doi10.1596/1813-9450-10367
okr.identifier.doihttps://doi.org/10.1596/1813-9450-10367
okr.identifier.externaldocumentum34022860
okr.identifier.internaldocumentum34022860
okr.identifier.reportwps10367
okr.import.id194
okr.importedtrueen
okr.language.supporteden
okr.pdfurlhttp://documents.worldbank.org/curated/en/099404203162310400/pdf/IDU0599eff88052ac04a990b738060858a1d0bef.pdfen
okr.region.countryTurkiye
okr.topicEnvironment::Climate Change and Environment
okr.topicMacroeconomics and Economic Growth::Climate Change Economics
okr.topicMacroeconomics and Economic Growth::Investment and Investment Climate
okr.topicSocial Development::Social Aspects of Climate Change
okr.topicAgriculture::Climate Change and Agriculture
okr.topicIndustry::Chemical & Petrochemical Industry
okr.unitECA Regional Director (SCADR)
okr.unitGGSVP-VP
okr.unitSD Practice Group
okr.unitGGS-Climate Change Group (CCG) (SCCDR)
relation.isAuthorOfPublication89ad6b6b-71d0-4200-9610-add17ae72e9e
relation.isAuthorOfPublication.latestForDiscovery89ad6b6b-71d0-4200-9610-add17ae72e9e
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