Spain | The transition to net zero emissions: economic and well-being effects

Summary

This Working Paper proposes a dynamic equilibrium model to study the transition to a decarbonized economy, the interaction between technology and fiscal policy, and its macroeconomic and well-being effects.

Key points

• Key points:
• As this model envisages, there are several ways in which technical progress can contribute to reducing carbon emissions, such as technical progress that favors efficiency in green energy generation, reducing emissions per unit of dirty energy production, or improving efficiency in the energy supply.
• However, other types of growth-enhancing technical progress may be accompanied by an increase in emissions, such as improvements in the total productivity of factors.
• In Spain, the extrapolation of recent trends in the combination of the different sources of technical progress indicate that it will not be sufficient to guarantee the achievement of the decarbonization target by 2050.
• As complementary measures, proactive strategies should be established to mitigate greenhouse gas emissions, such as offering subsidies for investment in clean energy, setting targets for the growth of fossil fuel prices (gas, coal and oil) that discourage their demand, and introducing taxes on carbon emissions.

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