Economic Impact of Energy Efficiency Policies: A Scenario Analysis

Abstract

The number of countries that have pledged to uphold the 2050 decarbonization targets is constantly growing, and many have established strategies and planned related investments for the coming years. The economic impact of decarbonization and energy efficiency policies has become a major topic of discussion in the global effort to mitigate climate change and contain the temperature rise to less than 2 degrees. Previous literature has identified the risks and opportunities of decarbonization policies, especially concerning the rebound effects and the situation that may arise if, due to persistent biases and the costs of fulfilling climate policies, industries were to transfer production to countries where laxer emission constraints are in force. At the core of the 2030 Agenda for Sustainable Development is the Sustainable Development Goals, which are a global call for action regardless of countries’ level of economic development. With Goal 12 on sustainable production and consumption and Goal 14 on climate change mitigation in mind, we provide an economic impact analysis of decarbonization and energy efficiency policies. We compare two scenarios based on the Italian context. The reference scenario is a simulation that shows the development of energy-efficient technologies if the targets set in the national energy strategy were to be met without additional binding targets being added. The policy scenario sees energy efficiency as the principal driver of decarbonization in the presence of a national emissions constraint lasting until 2030, as envisaged by the European Commission. The results confirm that certain risks and opportunities arise from effective policymaking. The effects of decarbonization and energy efficiency policies in the reference scenario would increase final demand by approximately €278.34 billion and the policy scenario would increase it by approximately €380.36 billion by 2030.