Exploring Macroeconomic Effects of Climate and Energy Transitions: An Agent-Based Modelling Perspective

This analysis extends and applies a state-of-the-art macroeconomic agent-based modelling (ABM) framework by integrating energy as a core component of production, consumption, and pricing decisions. Within this extended framework, various aspects of climate scenarios and associated energy system transformations are analysed. A unidirectional soft-link to an energy system optimisation model is used to inform decarbonisation pathways. The energy-economy framework envelops existing economic sectors within the ABM, enabling interactions between the energy extension and macroeconomic dynamics. Additional key factors are considered, such as the progressive recycling of carbon tax revenues, energy prosumerism, carbon capture, elements of the circular economy, and financial climate risk premia. Results indicate that, whilst substantial divergence in pace of decarbonisation and energy mix can be seen within the underlying energy system, aggregate macroeconomic growth paths remain relatively aligned in the short to medium term, but still fall short of potential growth.. [..] .. The carbon tax schedule and the recycling of its revenues are the most influential factors in determining aggregate outcomes: they outweigh other interventions and largely shape the overall temporal adjustment paths.