Coupling environmental transition and social prosperity: a scenario-analysis of the Italian case

This paper investigates the social and structural conditions grounding the feasibility of green growth policies. It takes the proposal of a Green New Deal as a reference and assesses i) whether green investments and innovation will be able to ensure the promised social prosperity and ii) what kind of social policies are able to compensate for the risk of increasing inequality. For this purpose, we develop a dynamic macrosimulation model of the Italian economy which explores the social and structural effects of the Italian integrated policy plan for energy and climate. We find that green growth alone will not result in better societal conditions and needs to be compensated with social policies to reduce inequality. Hence, we select two social policies, namely a basic income programme and a working time reduction policy, that are expected to deliver similar results in terms of redistribution and compare their environmental outcomes in terms of CO2 emissions. Our scenario analysis shows that working time reduction leads to an increase in employment and a parallel decrease in aggregate demand that cause both a reduction in emissions and inequality. On the other hand, the basic income programme reduces inequality by sustaining aggregate demand, which in turn reduces the positive environmental effects of the energy plan.