Soft-linking a general equilibrium model and an energy system model: towards a carbon–neutral economy by 2050

Key findings from this study

• The study found that energy transition scenarios produce 1.7% GDP gains by 2050 relative to business-as-usual, despite intermediate-period employment losses peaking around mid-transition.
• The authors report that capital inflow constraints reduce cumulative GDP over 2025-2050 by €64 billion and prevent welfare loss moderation observed under unconstrained scenarios.
• The researchers demonstrate that structural economic shifts accompanying fossil fuel replacement create unemployment peaks during transition periods, with convergence to approximately 0.2% above baseline by 2050.

Overview

This study integrates an Energy System Model with a Computable General Equilibrium model to evaluate macroeconomic impacts of transitioning the Netherlands toward carbon neutrality by 2050. The framework incorporates detailed energy technologies and hydrogen-related activities to assess alternative fuel adoption in hard-to-abate sectors. Two primary scenarios guide the analysis: a business-as-usual trajectory and an energy transition pathway aligned with carbon-neutrality targets, with a financing-constrained variant to examine capital's role.

Methods and approach

The researchers soft-linked an Energy System Model to a CGE model, enabling integration of granular energy technologies within economy-wide modeling. Hydrogen-related activities receive explicit treatment to improve representation of hard-to-abate sectors including steel and chemical production. The analysis compares three scenarios: business-as-usual, energy transition aligned with carbon neutrality, and energy transition with limited capital inflows. Model outputs track GDP, cumulative welfare, unemployment, and sectoral shifts through 2050.

Results

Replacing fossil fuels with renewable alternatives generates long-term GDP growth, with 2050 GDP reaching 1.7% above business-as-usual levels under the energy transition scenario. Cumulative GDP between 2025 and 2050 increases under the energy transition but declines by €64 billion when capital inflows are constrained. Unemployment peaks during the mid-transition period before declining, converging to approximately 0.2% above baseline by 2050. Initial welfare losses under the energy transition scenario moderate over time, whereas constrained financing produces persistently elevated welfare losses. Structural economic shifts drive employment disruptions despite long-term macroeconomic gains.

Implications

The energy transition generates substantial long-term macroeconomic benefits, yet transition costs manifest through unemployment and welfare losses concentrated in intermediate periods. Financing constraints significantly amplify negative impacts, reducing cumulative GDP gains and preventing welfare loss moderation. The analysis reveals tension between environmental objectives and near-term socioeconomic disruption, necessitating policy frameworks that address distributional consequences and labor market transitions.

Scope and limitations

This summary is based on the study abstract and available metadata. It does not include a full analysis of the complete paper, supplementary materials, or underlying datasets unless explicitly stated. Findings should be interpreted in the context of the original publication.