Quantifying the Impact of Coal Transition on GDP Growth through System Dynamics: The Case of the Region of Western Macedonia, Greece

Abstract

The transition from coal to more sustainable energy sources represents a critical shift for economies reliant on coal production. To investigate the intricate processes involved in such a transition, the use of powerful analytical tools is essential. This study assesses the impact of the delignification process on GDP growth over a 20-year horizon (2015–2035) in the Region of Western Macedonia, Greece, using the Vensim PLE Plus 9.0.1 software, a robust tool for system dynamics modeling. By developing a dynamic model that captures the key variables and feedback loops associated with coal transition, this research examines economic, social, and investment variables, emphasizing their causal relationships. The study integrates societal, economic, and educational impacts on production transition, addressing issues such as unemployment, financial support, and investments in human resources and R&D. Additionally, it considers the influence of climate change on GDP. The model highlights population dynamics, economic development, and education as critical factors. Scenarios explore the impact of increased funding on education, research, and financial aid efficiency, providing insights into enhancing GDP in decarbonizing regions. The study reveals that increased investment in education and human capital leads to slight improvements in local GDP, though the effects are not immediate. Enhanced efficiency in government and European spending significantly boosts local GDP by creating strong value chains and local economies of scale. It is found that the increase in financial support to the regions in transition is of the utmost importance and has a multiplicative nature, something that should encourage the European Union to increase its financial support tools. The model’s simulations align closely with historical GDP data, validating its accuracy. The contributions of the present work offer valuable insights to policymakers and stakeholders engaged in the transition processes.