Beyond Green Preferences: Alternative Pathways to Net-Zero Emissions in the MATRIX Model

35 Pages Posted: 21 Feb 2024

See all articles by Massimiliano Rizzati

Massimiliano Rizzati

Fondazione Eni Enrico Mattei

Emanuele Ciola

Fondazione Eni Enrico Mattei (FEEM), Milan; University of Brescia - Department of Economics and Management

Enrico Maria Turco

Catholic University of Milan

Davide Bazzana

University of Brescia - Department of Economics and Management; Fondazione Eni Enrico Mattei (FEEM)

Sergio Vergalli

University of Brescia - Department of Economics; Fondazione Eni Enrico Mattei (FEEM), Milan

Date Written: February 15, 2024

Abstract

Green preferences are often regarded as crucial factors in facilitating the energy transition. However, it is unclear if they can alone propel an economy towards achieving a net-zero emissions outcome. In this study, we expand the multi-agent integrated assessment model MATRIX by incorporating considerations on implicit emissions in the decision-making process of consumers and firms. To evaluate the efficacy of those green preferences, we construct a range of experiments encompassing varying degrees of pro-environmental attitudes. Those scenarios are then compared to more conventional incentive-based climate policies, such as a carbon tax and a Cap-and-Trade mechanism, with and without a subsidy for abatement technology, each implemented at different stringency. Our findings indicate that only exceptionally high and unrealistic values of green preferences for both firms and consumers can achieve a net-zero outcome in the absence of an active policy. Moreover, the most favorable scenario in terms of environmental, economic and distributional outcomes emerges from a carbon tax accompanied by a moderate subsidy. Without subsidy, policies entail mainly negative economic and distributional consequences as firms transfer the increased costs to consumers.

Keywords: Energy Sector, Agent-Based Models, Macroeconomic Dynamics, Climate Policy, Emission Abatement, Green preferences

JEL Classification: C63, Q52, Q58

Suggested Citation

Rizzati, Massimiliano and Ciola, Emanuele and Turco, Enrico Maria and Bazzana, Davide and Vergalli, Sergio, Beyond Green Preferences: Alternative Pathways to Net-Zero Emissions in the MATRIX Model (February 15, 2024). FEEM Working Paper No. 03, Available at SSRN: https://ssrn.com/abstract=4731030 or http://dx.doi.org/10.2139/ssrn.4731030

Massimiliano Rizzati (Contact Author)

Fondazione Eni Enrico Mattei ( email )

Italy

Emanuele Ciola

Fondazione Eni Enrico Mattei (FEEM), Milan ( email )

Corso Magenta 63
20123 Milan
Italy

University of Brescia - Department of Economics and Management ( email )

Contrada Santa Chiara 50
BRESCIA, BS 25122
Italy

Enrico Maria Turco

Catholic University of Milan ( email )

Largo Gemelli 1
Milan, MI Milano 20123
Italy

Davide Bazzana

University of Brescia - Department of Economics and Management ( email )

Contrada Santa Chiara, 50
BRESCIA, BS 25122
Italy

Fondazione Eni Enrico Mattei (FEEM) ( email )

C.so Magenta 63
Milano, 20123
Italy

Sergio Vergalli

University of Brescia - Department of Economics ( email )

Via San Faustino 74B
Brescia, 25122
Italy

Fondazione Eni Enrico Mattei (FEEM), Milan ( email )

Corso Magenta 63
20123 Milan
Italy

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