Structural change and socio-economic disparities in a net zero transition

Abstract

A net zero transition is likely to generate substantial and irreversible economic transformation. High-carbon industries and their related occupations will disappear, while new low-carbon industries and occupations will be created. In the aggregate, the impact of the transition on GDP and employment is commonly projected to be relatively moderate. However, such estimates hide drastic distributional issues that are sectorally and regionally concentrated. We use three sectorally detailed and regionally disaggregated macroeconomic models to explore the possible levels and impacts of structural change in a well below 2°C scenario. In addition to the expected decline in the carbon-intensive industries, we observe secondary impacts, particularly in the services sectors, that vary significantly between models. The risks entailed with structural change involve worsening economic disparity and societal division that could exacerbate existing socioeconomic and political polarisation. Impact assessments of decarbonisation should consider such distributional issues to avoid post-industrial decline and widening socioeconomic inequalities. Show more