Analysis of the macro-economic and production network implications of decarbonisation pathways.

Research output: Book/ReportReport

Abstract

The purpose of this report is to discuss how a decarbonising the steel, plastic, and paper industries may affect economic growth, wages and employment in the European Union (EU). We approach the issue from two different angles. First, we discuss how a decarbonization of the three industries may affect the rest of the economy. Second, we discuss how a decarbonization of the three industries may affect their future growth potential.

We conclude that the macroeconomic effects of a decarbonisation are likely to be relatively small but could under certain conditions still be economically
significant. The main factor determining the size of any macroeconomic effect is whether the decarbonization will lead to higher costs of materials elsewhere in the economy. The industries most likely to be affected by higher material costs are the manufacturing, utility and construction industries. How they respond depends on the level of competition and their ability to innovate. Industries that are characterized by a high degree of competition and product innovation are likely to respond by investing in new more efficient production technologies and to develop new products to increase their value added. Sectors where competitive pressures are low and the scope for product innovation limited are most likely to increase prices and reduce their output and employment levels.

The steel, plastic and paper industries future growth potential is partially linked to their ability to use modern technologies to increase efficiency and for product innovation. Based on recent data from the European Union we find that investment in new technology such as information and communication technologies have enhanced productivity in these three sectors without
having increased their greenhouse gas emissions. Some economic growth of this kind is likely to take place in the future and can be used to help to finance investments in low carbon technologies. It should a policy aim to encourage both decarbonization and modernization at the same time.

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Subject classification (UKÄ) – MANDATORY

  • Economics

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Original languageEnglish
PublisherReinvent Decarbonisation
Number of pages11
Publication statusPublished - 2019 Nov 30
Publication categoryResearch

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