Economic, social and environmental impacts of green transition investments in a holistic modelling approach

Abstract This paper provides novel insights into the economic, social and emission-saving impacts of green energy investments using the computable general equilibrium model MAGNET. MAGNET was extended to include sector-specific investment allocation, investment risk premiums adjustment and technology learning effects to endogenize productivity growth in renewable and bioenergy sectors. In line with the proposals on climate neutrality and the Green Deal, the study simulates an increase in investments in renewable energy and bioeconomy sectors (additional 15% replacement of capital stock) starting in 2025. It is found that additional green energy investments bring positive GDP, social and emission-saving effects. In the case of aggregate GDP, cumulative deviation from the baseline reaches 1.2% in 2050 for the EU as a whole. We also show that, on average, the investment policy would have a positive impact on bioeconomy sector with 3.2% deviation from the baseline in 2050. However, the impacts across particular countries and industries are very heterogenous. Moreover, the sensitivity analysis shows that without additional funding, negative crowding-out effects may occur in the economy. Still, the negative impact on GDP is limited to the regions with lower efficiency of green investments (e.g., France or Spain).