Macroeconomics of the energy transition

Abstract

This chapter attempts at disentangling the multiple contrasting interactions between economic conditions and energy transitions. It goes without saying that the net effect, resulting from the balance of such multiple contrasting interactions, is extremely difficult, or even impossible to predict. It very much depends on the specific characteristics of the economy facing the need to decarbonize, notably its current energy system, rate of growth of energy demand, available energy resources, and opportunities for decarbonization. All of these parameters are extremely variable country by country. It also greatly depends on the specific transition path pursued, and especially the intended speed of the transformation. This chapter lays special emphasis on the need to shift resources from consumption to investment and the consequent increase in the capital-output ratio, which has also consequences for the distribution of income.