Abstract
Urgently needed carbon emissions reductions might lead to strict command-and-control decarbonization strategies with potentially negative economic consequences. Analysing the entire firm-level production network of a European economy, we have explored how the worst outcomes of such approaches can be avoided. We compared the systemic relevance of every firm in Hungary with its annual CO2 emissions to identify optimal emission-reducing strategies with a minimum of additional unemployment and economic losses. Setting specific reduction targets, we studied various decarbonization scenarios and quantified their economic consequences. We determined that for an emissions reduction of 20%, the most effective strategy leads to losses of about 2% of jobs and 2% of economic output. In contrast, a naive scenario targeting the largest emitters first results in 28% job losses and 33% output reduction for the same target. This demonstrates that it is possible to use firm-level production networks to design highly effective decarbonization strategies that practically preserve employment and economic output.
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Data availability
The data on the financial transactions between Hungarian VAT-paying firms that support the findings of this study are available at the National Bank of Hungary, but restrictions apply to the availability of these data, which were used under licence in the current study by directly accessing the servers of the National Bank of Hungary and so are not publicly available. Requests for collaborations can be addressed to olahzs@mnb.hu
Code availability
The Python library pyeutl39, which was used to obtain the CO2 emissions of Hungarian firms, is open source and available at https://github.com/jabrell/pyeutl. The core components of the analysis, that is, the extraction of CO2 emissions data for Hungarian ETS firms, the code to calculate the ESRI and the initialization of the studied decarbonization strategies are available at https://github.com/jo-stangl/reducing_employment_and_economic_output_loss_in_rapid_decarbonization_scenarios.
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Acknowledgements
This work was supported in part by the Austrian Federal Ministry for Climate Action, Environment, Energy, Mobility, Innovation and Technology as part of the funding project GZ 2021-0.664.668 (S.T.), the Austrian Science Fund FWF under P 33751 (S.T.), the Austrian Science Promotion Agency FFG project under 39071248 (S.T.) and the OeNB Hochschuljubiläumsfund P18696 (S.T.). We thank J. Kertesz for helpful discussions.
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J.S. and S.T. conceived the work. A.B. cleaned and prepared the data. J.S. and A.B. wrote the code. J.S., A.B., C.D., T.R. and S.T. performed the data analysis. All authors analysed and interpreted the results. J.S. and S.T. wrote the paper. All of the authors contributed to the final paper.
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Stangl, J., Borsos, A., Diem, C. et al. Firm-level supply chains to minimize unemployment and economic losses in rapid decarbonization scenarios. Nat Sustain (2024). https://doi.org/10.1038/s41893-024-01321-x
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DOI: https://doi.org/10.1038/s41893-024-01321-x
