Beyond Green Preferences: Alternative Pathways to Net-Zero Emissions in the MATRIX model

Massimiliano Rizzati, Emanuele Ciola, Enrico Turco and Davide Bazzana
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Massimiliano Rizzati: Fondazione Eni Enrico Mattei and Department of Economics and Management, Università degli Studi di Brescia
Enrico Turco: Fondazione Eni Enrico Mattei and The Complexity Lab in Economics, Department of Economics and Finance, Catholic University of Milan
Davide Bazzana: Fondazione Eni Enrico Mattei and Department of Economics and Management, Università degli Studi di Brescia

No 2024.03, Working Papers from Fondazione Eni Enrico Mattei

Abstract: Green preferences are often regarded as crucial factors in facilitating the energy transition. However, it is unclear if they can alone propel an economy towards achieving a net-zero emissions outcome. In this study, we expand the multi-agent integrated assessment model MATRIX by incorporating considerations on implicit emissions in the decision-making process of consumers and firms. To evaluate the efficacy of those green preferences, we construct a range of experiments encompassing varying degrees of pro-environmental attitudes. Those scenarios are then compared to more conventional incentive-based climate policies, such as a carbon tax and a Cap-and-Trade mechanism, with and without a subsidy for abatement technology, each implemented at different stringency. Our findings indicate that only exceptionally high and unrealistic values of green preferences for both firms and consumers can achieve a net-zero outcome in the absence of an active policy. Moreover, the most favorable scenario in terms of environmental, economic and distributional outcomes emerges from a carbon tax accompanied by a moderate subsidy. Without subsidy, policies entail mainly negative economic and distributional consequences as firms transfer the increased costs to consumers.

Keywords: Energy Sector; Agent-Based Models; Macroeconomic Dynamics; Climate Policy; Emission Abatement; Green preferences (search for similar items in EconPapers)
JEL-codes: C63 Q52 Q58 (search for similar items in EconPapers)
Date: 2024-02
New Economics Papers: this item is included in nep-ene, nep-env and nep-hme
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Working Paper: Beyond Green Preferences: Alternative Pathways to Net-Zero Emissions in the MATRIX model (2024)
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