Dynamics of green transition based on stock-flow consistent model considering compound risks

Shuli Yan, Jingyuan Wang and Liangpeng Wu

Economic Analysis and Policy, 2024, vol. 82, issue C, 530-553

Abstract: The short-term economic fluctuations caused by green transition are underestimated, and there is limited research on the dynamic effects of compound risks on transitioning economies. We propose the SERENE flow-of-funds behavioral model to simulate and calibrate the Chinese economy, considering pension systems, policies, public expectations, long-term risks, and environmental constraints factors. We analyze the impacts of compound risks and exam the appropriateness of low-carbon transition policies. The results indicate the presence of non-linear loss amplification effects due to compound risks, which can lead to a decline in economic resilience. Additionally, three green transition policies exhibit varying degrees of effectiveness in transitioning the economy under long-term risk environments. Furthermore, it has been observed that by promoting green investments through pension funds, it is possible to promote green transition in terms of both scale and depth, while effectively reducing poverty and addressing income and distribution inequalities.

Keywords: Green transition; Energy security; Carbon price distortion; Flow-of-funds behavioral model (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecanpo:v:82:y:2024:i:c:p:530-553

DOI: 10.1016/j.eap.2024.03.023

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