Application Of A Dynamic Welfare-Centered Energy Transition Model

This paper introduces a welfare-centered energy transition model (“the Model†) as a complex framework for assessing and projecting welfare indicators using the EUROGREEN integrated assessment model and system dynamics principles. The Model focuses on simulating the impact of policy incentives on various indicators of welfare, with a particular focus on the transition toward the increased deployment of renewable energy. The Model incorporates a multidimensional welfare index comprising indicators pertaining to income, employment, education, environment, health, social security, and income inequality topics. Using the EUROGREEN model calibrated for the French economy, we simulate three scenarios: Baseline, Energy Mix, and Green Growth. The findings indicate that, while all three scenarios project an overall increase in welfare, the Green Growth scenario, which is characterized by the significant adoption of renewable energy sources and improvements in energy efficiency, offers the most significant gains. By contrast, the Baseline scenario exhibits the slowest growth in welfare metrics. Our analysis also reveals a relationship between GDP growth and welfare improvements, indicating that significant enhancements in societal welfare are achievable even with moderate economic growth. The study highlights the need to develop comprehensive policy frameworks that can effectively address adverse effects on employment and entrepreneurship while also providing economic incentives for businesses to accelerate the energy transition and adopt low-carbon technologies. The results of these projections highlight the importance of implementing social protection transfers and training programs to assist stakeholders during the transition period. Further, we demonstrate how different schemes for weighting welfare components can influence projections, underscoring the significance of methodological choices in welfare assessments.