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首页文档碳中和资料研究报告世界能源转型展望2023（第二卷）（英语版）--国际可再生能源署

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WORLD
ENERGY
TRANSITIONS
OUTLOOK 2023
1.5° C PATHWAY
VOLUME 2
ABOUT IRENA
The International Renewable Energy Agency (IRENA) serves as the principal platform for international
co-operation; a centre of excellence; a repository of policy, technology, resource and financial
knowledge; and a driver of action on the ground to advance the transformation of the global energy
system. An intergovernmental organisation established in 2011, IRENA promotes the widespread
adoption and sustainable use of all forms of renewable energy, including bioenergy and geothermal,
hydropower, ocean, solar and wind energy, in the pursuit of sustainable development, energy access,
energy security and low-carbon economic growth and prosperity.
www.irena.org
© IRENA 2023
Unless otherwise stated, material in this publication may be freely used, shared, copied, reproduced, printed
and/or stored, provided that appropriate acknowledgement is given of the author(s) as the source and IRENA
as the copyright holder. Material in this publication attributed to third parties may be subject to separate
terms of use and restrictions, and appropriate permissions from these third parties may need to be secured
before any use of such material.
ISBN: 978-92-9260-527-8
CITATION
IRENA (2023), World Energy Transitions Outlook 2023: 1.5°C Pathway, Volume 2, International Renewable
Energy Agency, Abu Dhabi.
Available for download: www.irena.org/publications
For further information or to provide feedback: publications@irena.org
DISCLAIMER
This publication and the material herein are provided “as is”. All reasonable precautions have been taken by
IRENA to verify the reliability of the material in this publication. However, neither IRENA nor any of its ocials,
agents, data or other third-party content providers, provides a warranty of any kind, either expressed or implied,
and they accept no responsibility or liability for any consequence of use of the publication or material herein.
The information contained herein does not necessarily represent the views of all Members of IRENA. The mention
of specific companies or certain projects or products does not imply that they are endorsed or recommended
by IRENA in preference to others of a similar nature that are not mentioned. The designations employed, and
the presentation of material herein, do not imply the expression of any opinion on the part of IRENA concerning
the legal status of any region, country, territory, city or area or of its authorities, or concerning the delimitation
of frontiers or boundaries.
3
WORLD
ENERGY
TRANSITIONS
OUTLOOK 2023
ACKNOWLEDGEMENTS
This report was developed under the guidance of Rabia Ferroukhi
(ex-Director, IRENA Knowledge Policy and Finance Centre) and Michael
Renner, and was authored by Gondia Sokhna Seck, Bishal Parajuli (IRENA)
and Xavier Casals (consultant).
The report benefited from reviews and inputs from Ute Collier (Acting
Director, IRENA Knowledge, Policy and Finance Centre), Elizabeth Press,
Roland Roesch, Ricardo Gorini, Michael Taylor, Nicholas Wagner, Mengzhu
Xiao (IRENA) and Álvaro López-Peña (consultant).
The modelling results were provided by Alistair Smith, An Vu, Ha Bui, Jamie
Pirie, Jon Stenning, Philip Summerton and Sachin Gulati (Cambridge
Econometrics).
IRENA would like to thank the Government of Germany for supporting
IRENA in the work that formed the basis of this report.
For further information or to provide feedback, publications@irena.org
/94
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WORLDENERGYTRANSITIONSOUTLOOK20231.5°CPATHWAYVOLUME2©IRENA2023Unlessotherwisestated,materialinthispublicationmaybefreelyused,shared,copied,reproduced,printedand/orstored,providedthatappropriateacknowledgementisgivenoftheauthor(s)asthesourceandIRENAasthecopyrightholder.Materialinthispublicationattributedtothirdpartiesmaybesubjecttoseparatetermsofuseandrestrictions,andappropriatepermissionsfromthesethirdpartiesmayneedtobesecuredbeforeanyuseofsuchmaterial.ISBN:978-92-9260-527-8CITATIONIRENA(2023),WorldEnergyTransitionsOutlook2023:1.5°CPathway,Volume2,InternationalRenewableEnergyAgency,AbuDhabi.Availablefordownload:www.irena.org/publicationsForfurtherinformationortoprovidefeedback:publications@irena.orgABOUTIRENATheInternationalRenewableEnergyAgency(IRENA)servesastheprincipalplatformforinternationalco-operation;acentreofexcellence;arepositoryofpolicy,technology,resourceandfinancialknowledge;andadriverofactiononthegroundtoadvancethetransformationoftheglobalenergysystem.Anintergovernmentalorganisationestablishedin2011,IRENApromotesthewidespreadadoptionandsustainableuseofallformsofrenewableenergy,includingbioenergyandgeothermal,hydropower,ocean,solarandwindenergy,inthepursuitofsustainabledevelopment,energyaccess,energysecurityandlow-carboneconomicgrowthandprosperity.www.irena.orgDISCLAIMERThispublicationandthematerialhereinareprovided“asis”.AllreasonableprecautionshavebeentakenbyIRENAtoverifythereliabilityofthematerialinthispublication.However,neitherIRENAnoranyofitsofficials,agents,dataorotherthird-partycontentproviders,providesawarrantyofanykind,eitherexpressedorimplied,andtheyacceptnoresponsibilityorliabilityforanyconsequenceofuseofthepublicationormaterialherein.TheinformationcontainedhereindoesnotnecessarilyrepresenttheviewsofallMembersofIRENA.ThementionofspecificcompaniesorcertainprojectsorproductsdoesnotimplythattheyareendorsedorrecommendedbyIRENAinpreferencetoothersofasimilarnaturethatarenotmentioned.Thedesignationsemployed,andthepresentationofmaterialherein,donotimplytheexpressionofanyopiniononthepartofIRENAconcerningthelegalstatusofanyregion,country,territory,cityorareaorofitsauthorities,orconcerningthedelimitationoffrontiersorboundaries.WORLDENERGYTRANSITIONSOUTLOOK2023ACKNOWLEDGEMENTSThisreportwasdevelopedundertheguidanceofRabiaFerroukhi(ex-Director,IRENAKnowledgePolicyandFinanceCentre)andMichaelRenner,andwasauthoredbyGondiaSokhnaSeck,BishalParajuli(IRENA)andXavierCasals(consultant).ThereportbenefitedfromreviewsandinputsfromUteCollier(ActingDirector,IRENAKnowledge,PolicyandFinanceCentre),ElizabethPress,RolandRoesch,RicardoGorini,MichaelTaylor,NicholasWagner,MengzhuXiao(IRENA)andÁlvaroLópez-Peña(consultant).ThemodellingresultswereprovidedbyAlistairSmith,AnVu,HaBui,JamiePirie,JonStenning,PhilipSummertonandSachinGulati(CambridgeEconometrics).IRENAwouldliketothanktheGovernmentofGermanyforsupportingIRENAintheworkthatformedthebasisofthisreport.Forfurtherinformationortoprovidefeedback,publications@irena.org3WORLDENERGYTRANSITIONSOUTLOOK2023FOREWORDAstheworldpreparesforthe28thConferenceofthePartiestotheUNFCCC(COP28),evermorefrequentanddevastatingweathereventsleavenodoubtthattheenergytransitionmustaccelerateimmediatelytoavoidthecatastrophiceffectsofclimatechange.Volume1oftheWorldEnergyTransitionsOutlook2023,releasedearlierthisyear,illustratedthepathwaytoa1.5°Cfutureindetail,andidentifiedbothprogressandgapsacrosssectorsandgeographies.IRENA’sworkhaslongemphasisedtheneedforaholisticapproachtotheenergytransition,encompassingnotonlytechnologicaldevelopments,butalsosocio-economicaspects.Thisrequiresanunderstandingofthefar-rangingtransformationsthatwillunfoldastheworldmovesfromfossilfuelstorenewablesandgreaterenergyefficiency.Thisvolumediscussesthesocio-economicimpactsofIRENA’sParisAgreement-compliant1.5˚CScenario,comparedtothePlannedEnergyScenario,usingthescenarioroadmapsfromVolume1.ItisbasedonIRENA’smacro-econometricmodellingworkandprovidespolicymakerswithinsightsintohoweconomicactivity,employmentandwellbeingmaybeaffectedunderthe1.5°Cpathway,comparedtocurrentpolicysettings.Thisanalysiscanassistcountriestodesignpoliciesthatmaximisethebenefitsoftheenergytransitionandminimiseadjustmentburdens.Anystructuraleconomicchangewillresultinwinnersandlosers;therefore,securingbeneficialoutcomesforallregionsandpeopleswillrequireabroadsetofpolicies.Thesemustbeguidedbyanunderstandingthattheenergysectorisessentialtoallhumanactivityacrosstheeconomy;thattheeconomyultimatelyexiststoservehumanwell-being;andthateconomiesandsocietiesdependontheintegrityoftheplanet’secosystems.Successfulpolicymakingmustnotberestrictedtotheenergysectoralone;differentgovernmentministriesanddiversestakeholdersshouldbeinvolvedindecisionmakingconcerningtheenergytransition.EchoingthemessagesfrompreviouseditionsoftheOutlook,thisvolumeoutlinesthecomprehensiveholisticpolicyframeworkrequiredtodeliverajustandeffectiveenergytransition.Inthe2022edition,IRENAexploredhowprogressivepolicies–i.e.greaterinternationalfinancialflowsandcollaboration,differentiatedcarbonpricinganddistributivepoliciestoaddressthepotentiallyregressiveimpactsoftheenergytransition–cannoticeablyimprovesocio-economicoutcomes.Thisvolumeextendstheanalysis,modelling4VOLUME2theeffectsofgreaterinternationalcollaboration,whileaWORLDsensitivityanalysisassessesthegenerationofadditionalENERGYtransitionrevenues.TRANSITIONSOUTLOOK2023ThesemeasurescanoffersignificantfurtherimprovementsinGDP,jobcreationandwelfareglobally,butamongpoorercountriesandregionsinparticular.Between2023and2050,underthe1.5°CScenario,globalGDPandeconomy-wideemploymentcouldseeanaverageannualincreaseof4.3%and2.1%,respectively,comparedtoabusiness-as-usualapproach.By2050,theenergytransitionwillincreaseenergysectorjobsby73millioncomparedtothecurrentlevel.Wealreadyhavemostofthetoolsweneedtoadvancetheenergytransition,backedbyextensiveexperienceindesigningpoliciestosupportthescale-upofrenewableenergy.TogetherwithitscompanionVolume1,thiseditionoftheWorldEnergyTransitionsOutlook2023providescriticalinsightsonwhatliesaheadifwechooseaction.Whatisneedednowistotranslatethisknowledgeintourgentandambitiouspolicymaking.ItismyhopethatthereportwillinspirepolicymakersandstakeholderstoagreepositiveoutcomesatCOP28.COP28FrancescoLaCameraDirector-GeneralInternationalRenewableEnergyAgency5WORLDENERGYTRANSITIONSOUTLOOK2023TABLEOFCONTENTSVOLUME2Foreword.................................0402Figures....................................08Tables......................................10CHAPTER2Boxes......................................10TRANSITIONSCENARIOSANDAbbreviations..............................11THEIRECONOMICIMPACTS.....34Keymessages.............................12Keynumbers..............................142.1ThePlannedEnergyScenarioEXECUTIVESUMMARY..................16(PES).................................36Fromtheperspectiveof01macroeconomicindicators.........36Fromthesectoralperspective.....37CHAPTER1INTRODUCTION.....................282.2The1.5˚CScenario..................382.3Principalassumptionsofthescenarios.............................40Carbonpricing......................40Supportivefiscalpolicies...........40Internationalcollaboration.........422.4GDPresultsattheglobalandregionallevels,andinselectedcountries.............................422.5Employmentattheglobalandregionallevels.......................50Economy-wideemployment.......50Employmentintheenergysector..53Employmentinrenewableenergy..566VOLUME2TABLEOFCONTENTS0304CHAPTER3CHAPTER4WELFAREIMPACTSOFTHECONCLUSIONSANDPOLICYENERGYTRANSITION.............60RECOMMENDATIONSFORAJUST,EQUITABLEANDINCLUSIVE3.1OverallwelfareindexunderENERGYTRANSITION..............76the1.5˚CScenario...................624.1Aholisticpolicyframework........773.2Adeepdiveintothewelfareindex........................674.2SupportivepoliciesforequitableTheeconomicdimension...........67outcomes............................79Thesocialdimension................68Theenvironmentaldimension.....694.3PoliciestopromotestructuralThedistributionaldimension........71change................................81Theaccessdimension..............734.3Makingtheglobaleconomymoresustainable..........................83References................................84Appendix:Assumptionsandresultsofwealthtaxsensitivityanalysis.......877WORLDENERGYTRANSITIONSOUTLOOK2023FIGURESVOLUME2FIGURES1PolicyassumptionsunderlyingtheanalysisofIRENA’senergytransitionscenarios............18FIGURES2GlobalGDP,averagepercentagedifferencebetweenPESand1.5˚Cscenario,2023-2050......19FIGURES3GDPinselectedcountries/regions,averagepercentagedifferencebetweenPESand1.5˚CScenario,bydriver,2023-2050....................................................20FIGURES4Globaleconomy-wideemployment,averagepercentagedifferencebetweenPESand1.5˚CScenario,bydriver,2023-2050....................................................22FIGURES5EnergysectorjobsinPESand1.5˚CScenarioatthegloballevel,2021-2050.................23FIGURES6Renewableenergyjobsattheglobalandregionallevel,2050.............................24FIGURES7Overallwelfareindexanddimensionalwelfareindexesforthe1.5˚CScenarioby2050:Global,AfricaandEU27...............................................................26FIGURES8Acomprehensivepolicyframeworkfortheenergytransition..............................27FIGURE1.1EstimatedtrendsinglobalCO2emissionsunderthePlannedEnergyScenarioand1.5°CScenario,2023-2050.............................................................30FIGURE2.1SectoralevolutionunderthePlannedEnergyScenariobetween2023and2050.............38FIGURE2.2Conceptualdifferencesacrossthescenarios.............................................39FIGURE2.3GlobalGDP,averagepercentagedifferencebetweenthePESand1.5°CScenario,2023-2050....43FIGURE2.4AveragepercentagedifferenceinglobalGDPbetweenthePESand1.5°CScenario,bydriverandbydecade...............................................................44FIGURE2.5Climatedamagesby2100underthePESand1.5°CScenario:Global,AfricaandEU27........46FIGURE2.6GDPbenefitsofthetransitionby2050,withandwithoutaccountingforclimatedamages:Global,AfricaandEU27...............................................................47FIGURE2.7GDPinselectedcountries/regions,averagepercentagedifferencebetweenPESand1.5˚CScenario,bydriver,2023-2050....................................................48FIGURE2.8Globaleconomy-wideemployment,averagepercentagedifferencebetweenthePESand1.5°CScenario,bydriver,2023-2050................................................50FIGURE2.9Averagepercentagedifferenceinglobaleconomy-wideemploymentbetweenthePESand1.5°CScenario,bydriverandbydecade..............................................51FIGURE2.10Averagepercentagedifferenceineconomy-wideemploymentinselectedregionsbetweenthePESand1.5°CScenario,bydriver,2023-2050................................52FIGURE2.11EnergysectorjobsatthegloballevelunderthePESand1.5°CScenario,2021-2050..........53FIGURE2.12Energysectorjobsinthe1.5°CScenario,byregion,2050.................................558VOLUME2LISTOFFIGURESFIGURE2.13RenewableenergyjobsatthegloballevelinthePESand1.5°CScenario,2021-2050.........56FIGURE2.14Renewableenergyjobsinthe1.5°CScenario,byregion,2050.............................57FIGURE3.1Fivedimensionsand10indicatorsofIRENA’swelfareindex................................61FIGURE3.2WelfareindexunderthePlannedEnergyScenario(PES)inselectedcountriesandregions,2023-2050..........................................................................63FIGURE3.3WelfareindexunderthePlannedEnergyScenarioand1.5°CScenarioinselectedcountriesandregions,2023-2050...............................................................64FIGURE3.4Overallwelfareindexanddimensionalwelfareindicesforthe1.5°CScenarioby2050:Global,AfricaandEU27...............................................................65FIGURE3.5WelfaredifferencesbetweenthePlannedEnergyScenarioandthe1.5°CScenario,bydimensionalcontributions,by2050:Global,AfricaandEU27..............................66FIGURE3.6Globalpercapitahealthdamagesduetopollutants,2022-2050...........................68FIGURE3.7Vulnerability-adjustedcumulativeCO2emissionsinthePlannedEnergyScenarioand1.5°CScenarioinselectedcountries,2023-2050..........................................70FIGURE3.8Globalincomeandwealthquintileratiosundervariousscenarios,2022-2050...............72FIGURE3.9EvolutionofpercapitatotalfinalenergyconsumptionacrossscenariosintheEU27andAfrica,2020-2050....................................................................74FIGURE3.10Ratioofpercapitatotalfinalenergyconsumptioninselectedregions/countries,2022and2050.......................................................................75FIGURE4.1Acomprehensivepolicyframeworkfortheenergytransition..............................78FIGURE4.2Theflowofpublicfinanceforajustandinclusiveenergytransition.........................80FIGUREA1Internationalcollaborationfunding:Contributionsanddistribution.........................87FIGUREA2ContributionstotheGlobalEnergyTransitionFundfrompublicsectorandwealthtaxation.....89FIGUREA3GlobalGDP,averagepercentagedifferencebetweenthePESand1.5°CScenariosensitivity,2023-2050..........................................................................90FIGUREA4Globaleconomy-wideemployment,averagepercentagedifferencebetweenthePESand1.5°CScenariosensitivity,bydriver,2023-2050...........................................91FIGUREA5Averagepercentagedifferenceineconomy-wideemploymentinselectedregionsbetweenthePESand1.5°CScenariosensitivity,bydriver,2023-2050...............................92FIGUREA6Impactofintroducingawealthtaxinthe1.5°CScenarioonthewelfareindexattheglobalandregionallevelsby2050:Global,AfricaandEU27.....................................939WORLDENERGYTRANSITIONSOUTLOOK2023TABLESVOLUME2TABLE1.1IRENAenergyscenariosandtheirpolicymeasures.....................................32TABLE2.1GDP,labourforceandpopulationgrowthprojectionsunderthePlannedEnergyScenario.............................................................37TABLE2.2Assumptionsonfossilfuelsubsidies...................................................41TABLEA1Wealthtaxassumptions..............................................................88BOXESVOLUME2BOX2.1IRENA’sclimatepolicyassumptions...................................................36BOX2.2Theimpactofclimatedamageontheeconomy........................................4610VOLUME2TABLEOFBOXESABBREVIATIONSCAGRcompoundannualgrowthrateCOP2828thConferenceofthePartiesCO2carbondioxideCSPconcentratedsolarpowerEUEuropeanUnionG20GroupofTwentyGDPgrossdomesticproductGHGgreenhousegasGtgigatonneGtCO2gigatonneofcarbondioxideGWgigawattIEAInternationalEnergyAgencyIRENAInternationalRenewableEnergyAgencyIRQDincomerelativequintiledifferencekWh/p-dkilowatthoursperperson-dayMWminingwagesOPECOrganizationofthePetroleumExportingCountriesPESPlannedEnergyScenarioPB-APolicyBasketAPB-BPolicyBasketBPVphotovoltaicQRquintileratioRCIResponsibilityCapacityIndexRQDrelativequintiledifferencetCO2tonneofcarbondioxideTFECtotalfinalenergyconsumptionUSDUnitedStatesdollarWRQDwealthrelativequintiledifference11KEYMESSAGESThesocio-economicdimensionoftheenergytransitioniscriticaltoitssuccess.Achievingthistransitionhingesonthreefundamentalpillars:(1)physicalinfrastructure:(2)policyandregulatoryenablers;and(3)skillsandcapacities.Theseelementsaredeeplyinterconnectedandengageincontinuousfeedbackloopswithboththeeconomyandsocietalstructures.Athoroughunderstandingoftheseinteractions-particularlyintermsofsocio-economicfactorslikedevelopment,employmentandsocialwelfare-iscriticalforinformeddecision-makingbypolicymakersacrosstheworld.Theenergytransitionpresentsahistoricopportunitytoaddressdisparitiesineconomicdevelopment.Theadoptionofdomesticallyavailableresourcesandatransitioninaccordancewiththe1.5˚CScenario,willresultinamoreinclusiveandbalanceddevelopmentpathforcountriesthathavelittleornofossilfuelresources.Progressivefiscalpolicies-suchascarbonpricingdifferentiatedbycountries’incomelevelsorgreaterinternationalcollaborationtosupportpoorercountries-canbringaboutmoreequitableoutcomes,asgrowthrateshavetraditionallyvariedsignificantlyacrossdifferentregionsandcountries.The1.5˚CScenarioofferssubstantialGDPgainsoverabusiness-as-usualscenario,withthemajorityofdevelopingcountriesadvancingatafasterrate.UnderthePlannedEnergyScenario(PES)andfollowingtherepercussionsoftheCOVID-19pandemic,theworld’srealGDPwouldincreaseatacompoundannualgrowthrateof2.8%peryearbetween2023and2050.Duringthesameperiod,underthe1.5˚CScenario,theworldcouldwitnessanaverageadditionalannualGDPgrowthof1.5%comparedtothePES.Publicinvestmentplaysakeyroleindrivingthepositiveeconomicimpact.Themajorityofdevelopingcountrieswouldwitnessfastereconomicgrowthcomparedtoadvancedeconomies.Theenergytransitionbringsemploymentgainsacrosstheeconomy.InthePES,economy-wideemploymentisexpectedtosteadilyincrease,withanestimatedaveragecompoundannualgrowthrate(CAGR)of0.4%.The1.5˚CScenarioisexpectedtolead(inaverageannualterms)to1.7%highereconomy-wideemploymentthanunderthePESoverthe2023-2050period.Theenergytransitionisalsoexpectedtoincreaseenergysectoremployment,withrenewableenergyjobspotentiallytriplingfrom2021levelstoabout40millionby2050.12VOLUME2By2050,alignmentwiththe1.5°Cenergytransitiongoalisprojectedtocreateanimpressive140millionjobsintheenergysector,asignificantincreasefromthecurrent67million.Thisis40millionhigherthanunderthePESin2050.Underthe1.5°CScenario,employmentintherenewableenergysectorispredictedtogrowsignificantly,fromthecurrent13.7millionjobsto40millionby2050.Overthesameperiod,investmentsinothertransition-relatedtechnologies(i.e.energyefficiency,powergridsandenergyflexibility,vehiclecharginginfrastructure,andhydrogen)couldresultinasubstantialincreaseinjobopportunities,withthesectorexpandingfromtoday's15millionjobstoanimpressive81million.Instarkcontrast,jobsintheconventionalenergysectorareexpectedtohalffromthepresent38milliontojust19millionby2050.Progressivepoliciesarenecessarytoboostsocio-economicbenefitsandspreadthembroadly.Substantialinequalityprevailsintheworldeconomy.Achievinggreaterequitywillrequireintensifiedinternationalcollaborationandstructuralchangetoensurethebenefitsoftheenergytransitionaredistributedbroadlyandthatburdensdonotfalldisproportionatelyonthepoor.Recognisingthatprioritiesacrosscountriesmayvarywidely,themodellingexerciseinthisreportassumesthatgovernments’greaterdiscretionaryspendingpowerwillbedirectedtowardspublicandpersonalservices.Privateinvestment–stimulatedinpartbygreaterpublicexpenditure–issignificantlyhigherbetween2023and2030underthe1.5°CScenariothanunderthePES,accountingfor37.5%ofthedifferenceinGDPbetweenthetwoscenarios.Structuralandsystemicchangesareneededforgreaterequityandwelfare.Greaterequityrequiresstructuralandsystemicchangesbeyondtheenergysector,addressingdecadesofunequaldevelopment.Internationalfinancialflows–especiallyfromtheeconomically-advancedeconomiestoemerginganddevelopingeconomies–areessentialinrectifyingtheseimbalances,alongwithlong-termcommitmentsintermsofindustrialpolicy,labourmarketmeasures,etc.Somerecentapproaches,suchasTheBridgetownInitiative,arealignedwiththeprojectedpositiveimpactsoftheenergytransitiononGDP,employmentandwelfare.Thesepoliciesareinstrumentalintransforminghistoricalunequaldevelopmentandrelations,ascorroboratedbyanticipatedeconomicandwelfareimprovements.13WORLDENERGYTRANSITIONSOUTLOOK2023KEYNUMBERSImprovementinglobalAnaverageannualgrossdomesticproductadditionalGDPof(GDP)comparedtothePES’sexpectedcompound+1.5%between2023and2050annualgrowthrateof2.8%underthe1.5˚CscenarioAverageannualAnaverageannualadditionaleconomy-wideadditionalemploymentofemploymentcomparedtoPES’sexpected+1.7%overthe2023-2050periodcompoundannualgrowthrateof0.4%underthe1.5˚CScenarioJobsintheenergysectorunderthe1.5˚CScenario140million+40millionjobsin2050comparedtoadditionaljobscomparedtotoday’s67millionthePESin205014VOLUME2Fossil-fueljoblosseswouldrequirere-trainingandre-skillingfortransition-relatedjobs.19million-17millionfossilfueljobsin2050underfossilfueljobslossesthe1.5˚CScenariocomparedtocomparedtothePESin2050today’s38millionJobsintherenewableenergysectorunderthe1.5˚CScenario39million+18millionjobsin2050comparedadditionaljobscomparedtotoday’s13.7milliontothePESin2050Jobsinotherenergytransition-relatedsectorsunderthe1.5˚CScenario81million+38millionjobsin2050comparedadditionaljobscomparedtotoday’s15milliontothePESin2050Globalwelfareimprovementin2050comparedtothePES+15%underthe1.5˚CScenarioSignificantpotentialforimprovementinsocialanddistributionaldimensionsatthegloballevel15WORLDENERGYTRANSITIONSOUTLOOK2023EXECUTIVESUMMARY16VOLUME2EXECUTIVESUMMARYTheworldfacesanumberofinterconnectedcrisesofunparalleledmagnitude.Climatechange,biodiversityloss,volatileenergyprices,lackofenergyaccessandsocio-economicinequalityallpresentformidablechallenges;combined,however,theireffectsintensify.Consequently,thepressingneedtorapidlytransitiontoamoresustainableenergysectorandglobaleconomyhasneverbeenclearer.Todate,policymakershavepredominantlyconcentratedonthetechnological,institutional,regulatoryandpolicyfacetsoftheenergytransition,withlessattentiontoitssocio-economicimplications.Thisreportcontendsthatcurrenttransitionnarrativesmaynotresonatewithallstakeholders,largelyduetotheiromissionofcentralsocio-economicdimensions.Whilstnotexclusivetotheenergytransition,distributionalissues(regardingincome,wealth,investmentandsocialexpenditure,energyandmaterialsuse,climatechangeimpacts,andothers)shouldbeaddressedtomaximisesocio-economicbenefits,andstrengthenacceptanceandsupportforthetransition.Bridginggapsinclimatepolicyambitionandfosteringessentialstructuralchangesnecessitateunparallelglobalcollaboration.IRENA’stransitionscenariospositionrenewablesasthemainenergysource,withariseintheglobalsharefrom16%in2020to77%by2050.Electrificationofend-usesectors,energyefficiencyimprovementsandrenewableenergydeploymentwouldcontributetostabilisingglobalenergyconsumptionby2050comparedtocurrentlevels.Volume2oftheWorldEnergyTransitionsOutlook:1.5°CPathwayanalysestwoenergyroadmapsfortheperiodto2050:(1)ascenariobasedoncurrentplans,thePlannedEnergyScenario(PES);and(2)anambitiousenergytransitionscenario(1.5°CScenario)thataimstoachievethe1.5˚CgoaloftheParisClimateAgreement.IRENA's1.5°CScenarioseesariseintheshareofrenewableenergyintheglobalprimaryenergysupplymixfrom16%in2020to77%by2050.Climatechange,biodiversitylossandsocio-economicinequalitydemonstratetheurgencyoftheglobalenergytransition.17WORLDENERGYTRANSITIONSOUTLOOK2023IRENA’sanalysisshowsthatinternationalfinancialcollaborationcanbeacentralfactorinimprovingthesocio-economicoutcomesofthetransition.Thisreportdiscussesthesocio-economicimpactsoftheIRENA1.5˚CScenariocomparedtothePlannedEnergyScenario(PES)andprovidesanupdateofthesocio-economicresultspresentedinthe2022editionoftheOutlook(FigureS1).FIGURES1PolicyassumptionsunderlyingtheanalysisofIRENA’senergytransitionscenarios.EnergytransitionCarbonpricingInternationalDistributionalpolicyroadmapclimatecollaborationPlannedBroadincometaxreductionsEnergybenefittinghigherquintilesScenario(PES)1.5°CLump-sumpaymentstargetedScenarioatlowerquintilesAnambitiousenergytransitionholdsgreatpromiseforboostingtheglobaleconomy.ComparedtothePES,between2023and2050,globalGDPwouldseeanaverageannualincreaseof1.5%underthe1.5˚CScenario(FigureS2).Publicinvestmentplaysakeyroleindrivingthepositiveeconomicimpact.Investment–togetherwithotherindirectandinducedeffectsarethemainmacroeconomicdriversthatgeneratedifferencesinGDPgrowththroughoutthetransitionperiod(i.e.2023–2050).PublicInvestmentintheenergytransitiondrivesrobustGDPgrowthandpavesthewayforajustandinclusivetransition.18VOLUME2EXECUTIVESUMMARYFIGURES2GlobalGDP,averagepercentagedifferencebetweenthePESand1.5°Cscenario,2023-2050.GDPdierencewithPES(%)2.01.5%1.01.50.51.00.4%00.5-0.50-0.520501.5°CScenarioChangeinGDPInduced:social-directedpaymentsInduced:aggregatepricesOtherindirectandinducedeectsInducedandindirect:otherPublicinvestmentandspendingPrivateinvestmentTradeNote:GDP=grossdomesticproduct;PES=PlannedEnergyScenario.However,growthratesvarymarkedlyacrossregionsandcountries,highlightingdisparitiesineconomicdevelopmentandunderscoringtheimperativeforinclusiveeconomicstrategies.WhileAfrica'spercapitaGDPissettodouble,thecontinent’sresource-richcountrieswilllikelyseefastergrowth,exacerbatingregionalinequalities.InEurope,economicdisparitiesmayalsobeamplified.Meanwhile,emergingeconomieslikeIndiaandChinaarepoisedforsignificantgrowth,potentiallyreshapingtheglobaleconomiclandscape.Thisanalysisexplorestheoutcomesofdiverseprogressivepoliciesdesignedtoaddressmountingglobalconcerns,includingfairness,justiceandequality,whileadvancingtheglobalenergytransition.Driversforeconomicoutcomesdiffer.ForafewG20countries,suchasIndiaandChina,theinvestmentdriveristhestrongestfactorboostingresultsoverthePES(FigureS3).TradeisalsoanimportantdriverincountriessuchasCanada,ChinaandSouthAfrica,duetotheireconomicstructures.Forthevastmajorityofdevelopingcountries,inducedsocial-directedpaymentsareanimportant,andsometimesdominant,factorinGDPdifferencesbetweenthescenarios.19WORLDENERGYTRANSITIONSOUTLOOK2023FIGURES3GDPinselectedcountries/regions,averagepercentagedifferencebetweenPESand1.5°CScenario,bydriver,2023-2050GDPdierencewithPES(%)1412108.3%86.0%642.8%21.5%1.3%1.3%0-2-1.4%-4-6G20BrazilCanadaChinaIndiaSouthAfricaGlobal1.5°CScenarioGDPPublicinvestmentandspendingInduced:social-directedpaymentsPrivateinvestmentInduced:aggregatepricesTradeInducedandindirect:otherNote:G20=GroupofTwenty;GDP=grossdomesticproduct;PES=PlannedEnergyScenario.20VOLUME2EXECUTIVESUMMARYFIGURES3GDPinselectedcountries/regions,averagepercentagedifferencebetweenPESand1.5°CScenario,bydriver,2023-2050(continued)GDPdierencewithPES(%)5040302015.3%14.0%12.0%107.7%5.4%2.6%0-3.9%-10-20-30CentralEastAfricaSouthernWestAfricaLatinSoutheastNorthAfricaAfricaAfricaAmericaAsiaGDP1.5°CScenarioPublicinvestmentandspendingInduced:social-directedpaymentsPrivateinvestmentInduced:aggregatepricesTradeInducedandindirect:otherNote:ExcludingArgentina,BrazilandColombia;G20=GroupofTwenty;GDP=grossdomesticproduct;PES=PlannedEnergyScenario.21WORLDENERGYTRANSITIONSOUTLOOK2023The1.5°Cpathwaywouldleadtoa1.7%increaseinaverageannualemploymentoverthePESinthe2023-2050period.The1.5°Cpathwaywouldcreatemoreemploymentthroughouttheeconomy.The1.5˚CScenariowouldleadto,inaverageannualterms,1.7%highereconomy-wideemploymentthanthePESoverthe2023-2050period(FigureS4).Reflectingfront-loadedinvestments,globaleconomy-wideannualemploymentwouldbe1.8%greateronaverageintheyearsto2040,butonly1.5%higherinthefinaldecade(2041-2050).FIGURES4Globaleconomy-wideemployment,averagepercentagedifferencebetweenPESand1.5°CScenario,bydriver,2023-2050EmploymentdierencewithPES(%)Changeinemployment2.01.7%1.5Otherindirectandinducedeects1.0TradePublicinvestmentandspendingPrivateinvestment0.501.5°CScenarioGlobalNote:PES=PlannedEnergyScenario.22VOLUME2EXECUTIVESUMMARYTheenergytransitionwillincreaseenergysectoremployment.Givenfront-loadedinvestments,by2030thenumberofjobsintheenergysectorcouldgrowto101millionunderthePES.Underthe1.5°CScenario,thenumberwouldbe134million–doublethecurrent67million(FigureS5).BetweenthePESand1.5˚CScenario,substantialjoblossesinfossilfuels(around12million)aremorethanoffsetbygainsof45millionjobsintheenergytransition–namelyinrenewables(around11million)andotherenergytransition-relatedsectors(energyefficiency,powergridsandflexibility,vehiclecharginginfrastructureandhydrogenataround34million)by2030.Employmentchangesafter2030aremarginal.Underthe1.5°CScenario,renewableenergysectoremploymentisexpectedtotriplefrom2021levelstoabout40millionjobsworldwideby2050.Solarenergyjobsareexpectedtorisetoaround18million(i.e.around45%ofthetotalrenewableenergyjobs)by2050underthe1.5°CScenario,almostafour-foldincreasecomparedto2021.Windenergywillalsoseehighjobcreationandisexpectedtorisefive-foldfrom2021,reachingover6million(around17%ofthetotalrenewableenergyjobs).Bioenergyjobswillgrowfromover4million(33%ofrenewablejobs)in2021toover10million(27%ofrenewablesjobs)in2050.FIGURES5GlobalenergysectorjobsinthePESand1.5°CScenario,2021-2050Globaljobs(inmillions)Conventionalenergy140120Othertransition-100relatedsectors8060Renewableenergy40202030205002021PES1.5°CPES1.5°CScenarioScenarioNote:PES=PlannedEnergyScenario.23WORLDENERGYTRANSITIONSOUTLOOK2023However,thesejobsareunevenlydistributedacrossregions.FigureS6showstheregionalandtechnologicaldistributionofrenewablesjobsunderthe1.5°CScenarioby2050.Asiaisexpectedtoaccountfora55%shareofglobalrenewableenergyjobs,followedbyEuropeat14%,theAmericasat13%andSub-SaharanAfricaat9%.Whilstfactorslikethesizeofpopulationsandeconomiesinfluenceregionaldistribution,theseoutcomeswillalsoreflecttheextenttowhichcountriesareabletoscaleupthedeploymentofrenewableenergyandwhethertheyhavesignificantdomesticsupplychainsinplace.FIGURES6Shareofrenewableenergyjobsbyregion,2050EU27+UKRestofRestofEastEuropeAsia6%Asia8%NorthAmericaMiddleEastand5%NorthAfrica17%6%Southeast%ShareinglobalLatinSub-SaharanAsia26%renewableAmericaAfricaenergyjobs12%Oceania8%9%Other0.5%WindSolarwaterheaterSolar(PVandCSP)HydroBioenergyNote:“Other”includesgeothermalandtidal/wave.CSP=concentratedsolarpower;EU=EuropeanUnion;PV=photovoltaic;UK=UnitedKingdom.24VOLUME2EXECUTIVESUMMARYConnectingthesocio-economicandtechnological/regulatoryfacetsoftheenergytransitionnecessitatespolicyinterventionsthattranscendtheshiftfromfossilfuelstorenewables.Policymakersmustaimforcoherencebetweenenergypolicyandothernationalpoliciesoverthelongtermtopromoteaninclusiveandjustenergytransition.Thelattermustkeeppeopleatitsheartandembracediversityandinclusionacrossseveralpopulationdemographics(e.g.women,youth,olderworkers,peoplewithdisabilities,migrantworkers,indigenouspeople,unemployedpeople,vulnerableworkers).Inadditiontothespecificeconomicandemploymentbenefitsdiscussedabove,akeyadvantageoftheenergytransitionliesinitsabilitytoimproveoverallglobalwelfare.IRENAmeasurespotentialwelfareimpactsthroughitswelfareindex.Theindexconsistsoffivedimensions–economic,social,environmental,distributionalandaccess–eachoneinformedbytwosub-indicators.25WORLDENERGYTRANSITIONSOUTLOOK2023Thereissignificantpotentialforimprovementsinthesocialanddistributionaldimensionsatthegloballevel.FigureS7showsthereislesseryetnoteworthypotentialintheeconomicandenvironmentaldimensions.Thisremainstrueevenunderthe1.5˚CScenariowiththeimplementationofstrongpoliciestargetingthesedimensions-particularlysocialanddistributionalaspects.FIGURES7Overallwelfareindexanddimensionalwelfareindexesforthe1.5°CScenarioby2050:Global,AfricaandEU27WelfareIndexGlobal0.75EnvironmentalEconomic0.340.69Access1.00Social0.53DistributionalWelfareIndex00.240.50.8710.370.450.060.950.780.441.000.410.42000.100.490.50.511AfricaEU27Note:Thefivepetalsareonascalefrom0(lowperformance)to1(highperformance)andrepresenttheabsolutevaluesofthefivedimensionsoftheWelfareIndex.Thenumberinthecentreisalsoonascalefrom0to1andrepresentstheabsolutevalueoftheoverallWelfareIndex.26VOLUME2EXECUTIVESUMMARYAchievingajust,inclusiveandmoresustainableworldcannotbesolelyentrustedtomarketforces.Prioritiesmustbedeterminedinopendebate,withpolicychoicesguidedbysocialdialogue.Governmentsandstakeholdersmustactivelypartakeinreshapingeconomicandsocialstructures.ThisreiteratesafoundationalpremiseinIRENA’ssocio-economicreports:policymakingmustbeinspiredbyaholisticframeworkthatbalancestechnologicalconsiderationswithsocial,economicandenvironmentalimperatives(FigureS8).FIGURES8AcomprehensivepolicyframeworkfortheenergytransitionDeploymentpoliciesIntegratingpoliciesEnablingpoliciesStructuralchangeandjusttransitionpoliciesInternationalENERGYandSouth-SouthECONOMYco-operationSOCIETYPLANET27WORLDENERGYTRANSITIONSOUTLOOK2023CHAPTER01INTRODUCTIONVOLUME2CHAPTER1CurrentpledgesandplansfallfarshortofIRENA's1.5°Cpathway,andwillresultina16GtCO2emissionsdeficitby2050.Theworldfacesaseriesofunprecedentedandintertwinedcrisesthatposeseriouschallengesforthestabilityofeconomiesandsocieties.Individually,fossilfuelpriceshocks,climatechange,biodiversitylossandsocio-economicinequalityareallseriousproblems;buttheinteractionsamongthemamplifytheireffects.Itisbecomingincreasinglyurgenttoacceleratethetransitiontoamoresustainableenergysectorandglobaleconomy.Arangeofmature,competitiveandcommerciallyviabletechnologicaloptionsareavailable,withothersindevelopment,andthepoliciesrequiredtofacilitaterenewableenergydeploymentarewellunderstood,yetthisaccelerationhasnotoccurred.Thisreportcontendsthatanessentialelementremainslargelyabsentintransitionplanningandpolicymaking;thesocio-economicdimension–ensuringwidespreadsharingofbenefits–iscriticaltothesuccessofthetransition,yettodatelimitedattentionhasbeenpaidtoitinmostsettings,withatendencytofocusontechnologicalandsomemicroeconomicaspects.Thisreportpresentsthesocio-economicimpactsoftheenergytransitionscenariosdetailedinVolume1oftheWorldEnergyTransitionsOutlook2023(IRENA,2023a).Twoenergyroadmapsfortheperiodto2050areanalysed:(1)ascenariobasedoncurrentplans,thePlannedEnergyScenario(PES)1;and(2)anambitiousenergytransitionscenario(1.5°CScenario)2thataimstoachievethe1.5˚CgoalconsistentwiththeParisClimateAgreement.Theanalysisprovidesapathwaytolimitingglobalwarmingbyreducingcarbondioxide(CO2)emissionsby37gigatonnes(GtCO2)fromestimatedlevelsin2022andattainingnet-zeroenergysectoremissionsby2050(Figure1.1).CurrentpledgesandplansfallshortofIRENA's1.5°Cpathway,resultingina16GtCO2emissionsdeficitby2050.1Thisisthereferencecase,providingaperspectiveonenergysystemdevelopmentsbasedonbasedongovernments’energyplansandotherplannedtargetsandpoliciesinplaceatthetimeofanalysis,withafocusonG20countries.2Thisscenariodescribesanenergytransitionpathwayalignedwiththe1.5°Cclimategoaltolimitglobalaveragetemperatureincreasebytheendofthepresentcenturyto1.5°C,relativetopre-industriallevels.Itprioritisesreadilyavailabletechnologysolutions,whichcanbescaleduptomeetthe1.5°Cgoal.29WORLDENERGYTRANSITIONSOUTLOOK2023Annualdeploymentof1000GWofrenewablepowerisneeded,eachandeveryyear,tostayona1.5°Cpathway.Globally,300GWofrenewableswereinstalledin2022,makingup83%ofnewcapacity,whilefossilfuelandnuclearadditionsmadeuponly17%.IRENA's1.5°Cscenarioseesariseinrenewableenergyintermsofprimaryenergysupplyfrom16%in2020to77%by2050.Electrificationofend-usesectors,energyefficiencyimprovementsandrenewableenergydeploymentwouldcontributetostabiliseglobalenergyconsumptionby2050comparedtocurrentlevels.Expressedin2021values,3investmentsofoverUSD5trillionperyearareneededtoachievethe1.5°Cclimatetargetby2050,totallingUSD150trillioncumulatively.Theglobalenergysystemmustbeentirelytransformedoverthecourseof30years.Tomaximiseenergytransitionbenefits,countriesneedacomprehensivepolicyframeworkthattransformsenergysystemswhileprotectingpeople,livelihoodsandjobs.FIGURE1.1EstimatedtrendsinglobalCO2emissionsunderthePlannedEnergyScenarioand1.5°CScenario,2023-2050Netannualenergy-andprocess-relatedCO2emissions(GtCO/year)205040PlannedEnergyScenario35Transport34GtCO30Buildings-7.9GtCOTransportOther-2.5GtCOReductions25BuildingsPowerandheatplants-1.3GtCOinsectorsOtherin2050-9.8GtCOfromPES20to1.5°CScenario1510PowerandheatplantsIndustry-12.7GtCO5Industry0Removals-5203020352040204520501.5°CScenario20232025-0.2GtCOSource:(IRENA,2023a).Note:GtCO2=gigatonneofcarbondioxide;PES=PlannedEnergyScenario.303Throughoutthisreport,dollarvaluesareexpressedin2021terms.VOLUME2CHAPTER1IRENAanalysesthesocio-economicfootprintofitsenergytransitionscenarioswiththehelpofamethodologydevelopedandrefinedoverseveralyears(IRENA,2016,2018,2019a,2020,2021a,2022a,2022b,2023b,2023c).Inthe2021editionoftheWorldEnergyTransitionsOutlook,IRENAexploredhowprogressivepolicies–internationalcollaborationinformedbyequityandjusticeconsiderations,differentiatedcarbonpricingandredistributiontoaddressthepotentiallyregressiveimpactsoftheenergytransition–canimprovesocio-economicoutcomes(IRENA,2021a).Theanalysisshowedthatinternationalfinancialflowsfargreaterthancurrentpledgesareneededtoimprovewelfareresults,whichinturnmaybeassumedtoraisetheacceptanceoftransitionmeasuresamongthegeneralpublic.IRENAexploredtheimpactofheightenedinternationalcollaboration,findingthatitleadstoverysignificantimprovementsforregionsandcountriesthatotherwisewouldexperiencetheleastbenefits(orevensuffernegativeimpacts)fromthetransition(IRENA,2022c;IRENAandAfDB,2022a).Atthesametime,theeffectswerealmostneutralfortheregionsandcountriesexpectedtobenefitmorefromtheenergytransition-anoutcomethatcouldgreatlycontributetothepoliticalfeasibilityofasuccessfultransition.Significantgapspersistnonetheless,withsomeregionsstillscoringverylowonseveralwelfaredimensions.Toillustratepotentialfurtherimprovementsinthesocio-economicoutcomesoftheenergytransition,themodellingexerciseunderlyingthisreportmakesanumberofassumptionsrelatingtotheuseofexpandedpublicsectorrevenues.Thereportdoessowiththeunderstandingthatactualpolicychoicesanddecision-makingprocessesincountriesaroundtheworldtendtovarywidely,drivenbyacomplexsetofsocial,economicandpoliticalcontexts.Attheindividualnationallevel,thesechoicesmayormaynotbealignedwiththebroadassumptionsunderlyingthemodellingwork.Attheinternationallevel,themodellingpresupposesahighdegreeofco-operationbutitshouldbenotedthatthisreportisnotintendedtoengagetheimportantquestionofwhether–orhow–sovereignactorsmightimplementsuchpoliciesindiverseandpotentiallychallengingpoliticalcircumstances.Instead,itseekstoillustratetheextenttowhichsuchmeasurescan,inprinciple,broadenthemanoeuvringspaceandcontributetoimprovedsocio-economicoutcomes.TheremainderofthischaptersummarisesthekeypolicymeasuresassociatedwithIRENA’s1.5°CScenario.Chapter2examinessocio-economicimpactsundertheseconditions,analysingmodellingresultsintermsofGDPandemployment.Chapter3offersadetailedanalysisofIRENA'smulti-dimensionalwelfareindexresults.Chapter4addressestheneedforabroadframeworkofcommonpoliciesthatcouldhelpbringaboutthesepositivechanges.31WORLDENERGYTRANSITIONSOUTLOOK2023Thenegativeimpactsofclimatechangearelikelytobegreaterindevelopingcountries.Inexploringtheimpactofpoliciesdesignedtoaddresssocialandeconomicstructuresthataffectthewayinwhichtheenergysectorisreshaped,thegoalistobroadenthetransitionnarrativeinwaysthatcanyieldgreatersupportforaglobalcollaborativeefforttoaddresscommonchallenges.IRENA’sPlannedEnergyScenario(PES),whichsketchesthedevelopmentoftheenergysectorthrough2050undercurrentpolicies,actsasabaselineagainstwhichtomeasuretheimplicationsandperformanceofthe1.5°CScenario.ThePESisbasedonpoliciesthathavealreadybeenannouncedbygovernmentsorarecurrentlyunderimplementation,whereasthe1.5°CScenariorestsonabasketofmoreambitiouspolicies.Internationalcollaborationisanimportantcomponentofthepolicybasketinthe1.5°CScenario.Althoughtheaccumulatedcarbonintheatmospherestemsmainlyfromemissionsbydevelopedcountries,theeffectsofclimatechangearelikelytohaveagreaterimpactondevelopingcountriesowingtotheirlackofsocialandphysicalinfrastructureforclimatechangeadaptationandresilience.Tobuildtheirresilienceandadvancetheenergytransitionathome,developingcountrieswillrequiresupportfromeconomicallyadvancedcountries.Onesourceoffundingisincorporatedintothemodel’sframeworkforinternationalco-operation4i.e.governmentcontributions.Table1.1providesasummaryofthescenariosanalysedinthisreport.TABLE1.1IRENAenergytransitionscenariosandtheirpolicymeasuresPES1.5°CScenarioPolicybasketEnergyandsocio-economicSupportivepolicieswithpoliciesalreadyannouncedinternationalcollaborationorcurrentlyunderandredistributionimplementation4Incumulativetermsthesesourcesproducethesamefinanceresourcesinthe2023-2050period.32VOLUME2CHAPTER1Bridginggapsinclimatepolicyambitionwillrequireanunprecedentedglobalcollaborativeeffort.Atransitionnarrativethatincludesequity,justiceandinclusivedevelopmentasfundamentalobjectivesmaybeabletomobilisebroadsocialandpoliticalsupport.Thisisessentialgiventhatsocietieswillneedtoaccelerateclimateactiontomakeupforpastinaction.Withglobalwarminghavingalreadypassed1.2°C(Forsteretal.,2023;Sanderson,2023)everyfractionofadegreemattersinmitigationefforts.Itisironicthatsocietiesmaybecaughtbetweenrisingclimateimpactsfromlimitedambitioninthepastandthesocio-economicdisruptionsofacceleratedtransitionactionundertakennow.Thetaskathandisdauntingbutachievable.•Theinclusivedevelopmentcomponentstandsforgloballysharedprosperity.Structuralchangesintheeconomyareakeycomponentforopeningupspaceforinclusivedevelopmentwithinplanetaryboundaries5(Brandetal.,2021;EnsorandHoddy,2021;Richardsonetal.,2023;Rockstrometal.,2023)andlimitingglobalwarmingsothatitdoesnotjeopardisedevelopmentitself.•Thejusticecomponentconcernsnotleavinganyonebehind.Oneaspectaddressesthechallengesthatfossil-fuel-dependentworkers,communitiesandcountriesencounter,includingmisalignmentsinthelabourmarket.Asecondaspectconcernslimitingtheregressiveimpactsofotherwisepositivetransitionpoliciessuchascarbonpricing,orenergyefficiencystandardsandbuildingmandatesthatraisehousingcostsforpeoplewithlowincomes.•Theequitycomponentfocusesonhowtoequitablyaddresstheburdensandbenefitsstemmingfromthetransitionwhilecontributingtogloballysharedprosperity.Itaccountsfordistributionalaspectsofemissions,energy,income,wealth,andopportunities.Aholisticapproachtothetransitionbringstogetherthephysicalandtechnologicaldimensionofthetransition(withtheaimofdeployingrenewablesandotherenergytransitionsolutionsinresponsible,sustainableandcleanways)withthesocio-economicdimension.5Thelatestscientificassessmentofnineplanetaryboundariesfindsthatsixofthemhavealreadybeencrossed.Inadditiontoclimatechange,theyconcernbiosphereintegrity,landsystems,freshwater,biogeochemicalflows,andnovelentities.Theremainingthreeboundariesouroceanacidification,atmosphericaerosolloading,andstratosphericozonedepletion(Richardsonetal.,2023).33WORLDENERGYTRANSITIONSOUTLOOK2023CHAPTER02TRANSITIONSCENARIOSANDTHEIRECONOMICIMPACTSVOLUME2CHAPTER2Theenergytransitionencompassesfarmorethanjusttechnologicaldevelopmentsandthepoliciestodrivethetransformationoftheenergysystem;itsignalsprofoundshiftsthatwillaffectglobaleconomiesandsocieties.Graspingthenatureandextentofthesechangesisvitalforeffectivepolicymakingandforensuringafairandinclusivetransition.Countriesaremakingprogresstowardthe1.5°Cgoalindifferentcontextsandatdifferentspeeds,withdiversesocietalandeconomicimplications.Toassesshowtheenergytransitionwillaffectgrossdomesticproduct(GDP),employmentandwelfare,IRENAusesamodellingframeworktoconnecttheworld’senergysystemsandeconomies.Resultsofpreviousanalysessuggestthattransitioningtoa1.5°CScenariowouldboosteconomicactivity,jobopportunitiesandwelfaremorethanthePlannedEnergyScenario(PES),assuminganappropriatepolicyframeworkwereinplace(IRENA,2021b,2022d,2022c;IRENAandAfDB,2022a;IRENAandILO,2022,2023a,2021).IRENA’sanalysisexploresthesocio-economicoutcomesresultingfromtheassumptionscontainedinitsscenarios(seeBox2.1).Thosescenariosincludearangeofmeasurestosupportajustandinclusivetransition.Amongthemarecarbonpricing,internationalcollaboration,subsidies,progressivefiscalregimestoaddressdistributionalaspects,investmentsinpublicinfrastructure,andspendingonsocialinitiatives.Thischapterprovidesinsightsintohowcertainpoliciescandeliverthehighestpossiblebenefits.Italsoshowshowresultsvaryaccordingtopolicymeasuresandunderlyingeconomicstructuresanddependencies.Thesefindingsdelineatethesubstantialdifferencesbetweenthe1.5°CScenarioandthePES.Section2.1explainsthebasicindicatorsofthePES.Transitioningtoa1.5°CScenariowouldboosteconomicactivity,jobopportunitiesandwelfare.35WORLDENERGYTRANSITIONSOUTLOOK2023BOX2.1IRENA’sclimatepolicyassumptionsHolisticplanningandsynergisticimplementationcanaddressthemultipleinteractionsbetweentheenergy,economyandsocialsystemsmoresuccessfullythananapproachthatreliesonalimitednumberofdisconnectedinterventions.IRENA’ssocio-economicfootprintanalysisincludesinitsmodellingaverydiversesetofpoliciestoenableandsupportafair,equitableandsustainableenergytransition.Carbonpricingprovidesapowerfulexample.Thelevelofcarbonpricingneededtobringaboutasuccessfulenergytransitiondependsontheeffectiveimplementationofaccompanyingpolicies.SinceIRENA’sanalysisincludesadiversesetofpolicies,transitiongoalscanbeachievedwithsignificantlylowercarbonpricesthanmightotherwiseberequired.IRENA’ssocio-economicanalysisassessesthefollowingsetofpolicies:•Mandatestophaseoutthesubsidisationanduseoffossilfuels.•Carbonpricingthatevolvesovertime,differentiatespricesbyeachcountry’sincomelevelandaccordsspecialtreatmenttosectorshavinghighdirectimpactsonpeople(suchashouseholdpowerandroadtransport).•Policiestolinkinternationaldevelopmentco-operationwithtransitionrequirements(e.g.earmarkingaidfundsfortransition-relatedinvestmentsorgreatersocialspending).•Directpublicinvestmentandspendingtosupportthetransition,withaspecialfocusonenablinginfrastructure(electricvehiclechargingstations,hydrogeninfrastructure,smartmeters,andsoon)andenergyefficiency.•Domesticprogressiveredistributivepolicies.•Publicinvolvementinaddressingstrandedassets,bothdomesticallyandinternationally.•Policiestoaligngovernmentfiscalbalanceswithtransitionrequirementsandtoaddressdomesticdistributionalissues.2.1ThePlannedEnergyScenario(PES)FromtheperspectiveofmacroeconomicindicatorsUnderthePES,theworld’seconomyisexpectedtoexperiencestrongeconomicgrowth,asenvisionedinthebaselineassumptionoftheE3MEmodel,aglobal,macro-econometricmodelownedandmaintainedbyCambridgeEconometrics.6UnderthisbaselineandfollowingtherepercussionsoftheCOVID-19pandemic,theworld’srealGDPwouldincreaseatacompoundannualgrowthrateof2.8%peryearbetween2023and2050.Thisexpansionratehassignificantnegativeconsequencesfortheplanet’sresourcesandecosystems,givencurrentpolicysettings.ThePESunderscoresthat,althoughtherewillbeasubstantialreductionintheenergyandcarbonintensityoftheglobaleconomyrelativetocurrentlevels,thesereductionswillnotbeenoughtomeetthechallengesofclimatechange.6IntheE3MEmodel(www.e3me.com),baselineforecastsareconstructedusingacomprehensivesetofinternationaldatasources.ThemainsourceforpopulationdataistheUnitedNations(WorldPopulationProspects);forGDPforecasts,themainsourcesaretheInternationalMonetaryFundforshort-termforecastsand,forlong-termforecasts,theEuropeanCommission(AnnualAgeingReport)andInternationalEnergyAgency(WorldEnergyOutlook).TheseareappliedtohistoricaldatafromtheWorldBank,InternationalMonetaryFundandEuropeanCommission(AMECO,Eurostat).36VOLUME2CHAPTER2TABLE2.1AssumptionsonGDP,labourforceandpopulationgrowthunderthePlannedEnergyScenarioCompoundannualgrowthrate(%)2023-20302031-20402041-2050Realgrossdomesticproduct2.43.22.7Economy-wideemploymentTotalpopulation0.50.40.20.90.70.6Theworld’spopulationisprojectedinthebaselinetogrowatacompoundannualgrowthrateof0.7%overthe2023-2050period,toreach9.7billionby2050(Table2.1).Economy-wideemploymentisalsoexpectedtorisebyanaverageofaround0.4%peryearoverthesameperiod.FromthesectoralperspectiveChangesunderthePESinthesectoraldistributionofgrossvalueaddedatthegloballevelbetween2023and2050areshowninFigure2.1.Basicmanufacturingremainsaleadingindustryduetotheabidingneedformanufacturedgoods.Distributionandretailshowconsistentgrowth,reflectingagrowingconsumermarket,whiletheconstructionindustryalsoshowsamajorupswing,particularlyinthelastyearsofthePES.Alsoontheriseistransport,whichbodeswellfordevelopingworldwidetransportinfrastructureinanticipationofelectricvehicles.By2050,businessserviceswillhavemadethemostsignificantcontributiontoglobalvalueadded,highlightingthegrowingimportanceoftheservicesectortotheglobaleconomy.Asaresultoftheglobalmovementawayfromcoalandthepledgesmadebyvariouscountriestophaseoutcoalaltogether,thecoalsectorexperiencesasteepfallafter2022.Thesimilartrajectoriesofoil,gasandmanufacturedfuelssuggestapeakinthemid-2020s.Growthundercurrentpoliciescanhavesignificantnegativeconsequencesfortheplanet’sresourcesandecosystems,andfurtherexacerbatetheissueofunequaldevelopment.37WORLDENERGYTRANSITIONSOUTLOOK20232.2The1.5°CScenarioThiseditionoftheWorldEnergyTransitionsOutlookbuildsonanalysisfrompreviousyears.ThePESandthe1.5°CScenariowereintroducedandanalysedinthe2021edition(IRENA,2021b).Thetwoscenarioswereanalysedtogetherwithasetofpolicymeasures.Wewillrefertothesetofpolicyassumptionsfromthe2021editionasPolicyBasketA(PB-A).Buildingonthe2021edition,the1.5°CScenario’ssocio-economicoutcomeswereanalysedinthe2022edition(IRENA,2022c)withadditionalpolicyelements(PolicyBasketB).PB-Bmandatedalowcarbonprice–yethigherthanreal-worldlevels–inconjunctionwithgreaterinternationalco-operativeassistance,whilePB-A(fromWETO2021)impliedahighcarbontaxandlowinternationalcollaboration(i.e.limitedflows,albeithigherthanpresentpledges).UnderPB-B,thecarbontaxwashalfthatofPB-A,withsomeadjustmentmadefordifferencesinnationalincome.InPB-A,the2030carbonpriceforhigh-incomecountrieswasUSD300/tonneofcarbondioxide(tCO2),comparedwithUSD150/tCO2inPB-B(bothin2019USD).Forlow-incomecountries,thevalueswereUSD60/tCO2andUSD30/tCO2,respectively.PB-AencouragedmoreinternationalcollaborationtoenableFIGURE2.1SectoralevolutionunderthePlannedEnergyScenariobetween2023and2050Grossvalueadded(USD2021trillions)AnnualGDPgrowthrate(%)122.9%3.0AnnualGDPgrowth10ratefromthe2.5previousyear81.9%2.4%Otherservices6Businessservices42.0Distribution2andretail01.5ConstructionElectricitysupply20231.0andotherutilitiesEngineeringand0.6%0.5transportequipmentBasicmanufacturing0Fossilfuelandother2050extractionindustriesAgriculture20302040Notes:“Otherservices”includehotelsandcatering;communications,publishingandtelevision;publicandpersonalservices;andtransportationservices.GDP=grossdomesticproduct.38VOLUME2CHAPTER2anequitabletransitionandaddressinternationaldistribution,mitigatinggovernments’lossofrevenuefromdecreasedcarbonpricing.AsapercentageofglobalGDP,theseinflowswere0.7%,oranannualaverageofUSD918billion(2019USD).ThisisroughlythreetimestheinternationalcollaborationinflowsincludedinPB-A(USD290billion/year,orthreetimespresentpromises).Asaresult,lower-incomeregionsthatarehometomostoftheworld’spopulationexperiencesignificantbenefitswhenswitchingtoPB-B,indicatingamoreequaldistributionoftransitionbenefitscomparedwithPB-A.MostplacesthatexperiencelowerGDPgrowthafterchangingtoPB-BneverthelessoutperformthePES.IntheEuropeanUnion,the2030GDPinthe1.5°CScenariois0.4%higherthaninthePES;itis1.9%higherinEastAsia.TheseregionsgaininPB-Bfromhostingsupplychainsandexportingseveralenergy-transition-relatedtechnologies.Ingeneral,PB-Bimprovesequityandmakestheenergytransitionmorejust.Forwealthycountrieshighlyreliantonfossilresources,PB-BcannotreversenegativeGDPresultscomparedwiththePES(aresultalsoobservedinthe2021edition).Countriesmaythereforeneedtoundertakemeasuresbeyondgreaterinternationalcollaborationtopromotefundamentalchangesintheireconomiesandimprovethesocio-economicfootprintoftheirenergytransitionefforts.Thisyear’sreportcomparesthePlannedEnergyScenario(PES)tothe1.5°CScenariowithasupportivepolicylayer,equivalenttothePB-Bscenariointhe2022edition(IRENA,2022b).Italsoaddsasensitivityanalysistocompareanadditionalpolicydimension–aredistributivewealthtax-andinvestigateitspotentialsocio-economicoutcomes(SeeAppendix).ThefindingsdelineatemoreclearlythaneverthedifferencesbetweenthePESandthe1.5°CScenario.FIGURE2.2PolicyassumptionsunderlyingtheanalysisofIRENA’senergytransitionscenarios.EnergytransitionCarbonpricingInternationalDistributionalpolicyroadmapclimatecollaborationPlannedEnergyBroadincometaxreductionsScenariobenefittinghigherquintiles(PES)1.5°CLump-sumpaymentstargetedScenarioatlowerquintiles39WORLDENERGYTRANSITIONSOUTLOOK20232.3PrincipalassumptionsofthescenariosCarbonpricingCarbontaxes,aformofcarbonpricing,maketheexternalcostsofgreenhousegas(GHG)emissionsvisiblebytaxingfossilfuelsonthebasisoftheirCO2emissions,thusgivingGHGemitterstheincentivetoreduceemissions.Consideredaneffectivetoolwithalowlikelihoodofcausingeconomicharm,carbontaxesarenowbeingimplementedacrosstheglobe,albeitunevenlyandoftenatrateswellbelowthetruedamagecosts(Dumoulin,2023;Santos,2023).GlobalrevenuefromcarbontaxesandtheEmissionTradingSchemehavereachedUSD95billionwhilecovering23%ofglobalGHGemissions(WorldBank,2023).However,thepotentialinequityofthedistributionalimpactsofcarbontaxesmustbeconsideredwhileplanningtheallocationoftherevenuetheygenerate(Boyce,2018).IRENAhasstudiedtheweightofcarbonpricingpoliciesonthesocio-economicfootprintbymodellingthefollowingsuppositions:•Utilisingexistingfiscalpoliciestoreducetheburdensofcarbontaxesonendconsumers.•Assigningtherevenuefromcarbonpricingtopublicinvestmentinajustenergytransitionandtosubsidies.Themacroeconomicmodellingassumesrevenueneutralityingovernments’fiscalbalances.Revenuerecycling7isattheheartofthemodel'shypothesis.However,theprogressivenessoftheresultdependsonthepoliciesusedtoimplementrevenueneutrality.Forinstance,inthePES,whengovernmentrevenuesincrease(forinstancethroughcarbonprices),incometaxesarereduced,whiletheyareincreasedwhengovernmentrevenuesdecrease.Thisapproachhasregressiveimplications,however,asthewealthiesthouseholdsgenerallypaythelion’sshareofincometaxesandbenefitaccordinglyfromthetaxcuts.Bycontrast,inthe1.5˚CScenario,revenuesareassumedtoberecycledthroughsocial-directedpaymentsthattargetlower-incomehouseholdsprogressively,assumingtheadoptionofdistributionalpoliciestomitigateanyregressiveeffectsoftheenergytransition–notonlycarbonpricingbutalsoclimatechangeitself.Thesocial-directedpaymentsassume60%ofthepaymentsgoingtothelowest-incomequintile,30%tothesecondquintileand10%tothethirdquintile.SupportivefiscalpoliciesAscountriesmoveawayfromfossilfuels,onefiscalpolicythatneedstoberolledbackisthefossilfuelsubsidy;butthefactthatenergypriceshaveasignificantimpactonoverallcostoflivingmakesitharderforcountriestophaseoutbothfossilfuelsandassociatedsubsidies(IMF,n.d.).However,manyfossilfuelsubsidiesareintheformofforegonerevenueintaxbreakstofossilfuelcompaniesorenergyintensiveindustries–thesecanbemoreeasilyrolledbackwithoutimpactingtheleast-well-offinsociety.Withtheupwardtrendbothinoverallcostoflivingandenergyprices,removingconsumersubsidieswithoutcarefulpolicydesignandasensitiveimplementationstrategywillhitthepoorestmembersofsocietyhardest,whichinturncouldcausesocialunrest(Horowitz,2022).7Fromamodellingperspective,revenuerecyclingisnotonlyapolicyinstrumentforaddressingdistributionalissuesinthecontextofscenarios;itisalsoawaytoavoidassumingthatinthecasewherelargeinvestmentsmustbemadetofinancethetransition,governmentswouldincreaseborrowingwithoutanyquantifiedimpactontheeconomyandsociety.40VOLUME2CHAPTER2Carefuldesignofpoliciesandimplementationstrategiesiscrucialtoensurethatthemostvulnerableinsocietyareprotected,notburdened.Fossilfuelsubsidiesareanimportantpartoftheassumptionsunderpinningtheanalysispresentedhere.Therearevaryingassumptionsforadvancedeconomies,themembersoftheOrganizationofthePetroleumExportingCountries(OPEC)andemerging/developingeconomies.InthePES,advancedeconomiesareexpectedtoeliminatesubsidiesbytheearly2030satarateofapproximately5%peryear.OPECcountrieswillfollowsuitbythe2050s(withaslowerrateofaround3%),whileemerginganddevelopingeconomiesareaimingforthelate2030s(witha4%rate).Themoreambitious1.5°CScenarioacceleratesthesetimelines.Advancedeconomieswouldreachzerosubsidiesby2030,OPECcountriesbythemid-2040s,andemerginganddevelopingeconomiesbytheearly2030s.Therateofreductionisnotspecifiedforthe1.5°CScenario.Overall,thedatasuggestthatadvancedeconomiesareleadingthechargeinsubsidyreduction,followedbyemergingeconomiesandthentheOPECcountries.Table2.2providesasummaryoftheassumptions.TABLE2.2AssumptionsonfossilfuelsubsidiesZerosubsidiesreachedunderPlannedEnergyScenario1.5°CScenarioAdvancedeconomiesEarly2030s2030OPECcountries2050sMid-2040sEmerginganddevelopingeconomiesEarly2030sLate2030sNote:OPEC=OrganizationofthePetroleumExportingCountries.41WORLDENERGYTRANSITIONSOUTLOOK2023InternationalcollaborationGreaterinternationalcollaborationbetweenthedevelopinganddevelopedcountrieswillbeessentialtoachieveglobalclimategoals.Internationalcollaborationtakesvariousforms:monetarysupport,technologytransfer,technicalassistance,andcapacitybuilding.Internationalcollaborationhelpscountriesstrengthentheircapacitiesincriticalareassuchasinstitutionaldevelopment,economicstructures,socialcohesion,andresearchandinnovationtopromotesustainabledevelopmentandreduceinequity.Prominentexamplesofblendedco-operationaretheEnergyTransitionMechanismoftheAsianDevelopmentBankandtheJustEnergyTransitionPartnershipoftheEuropeanUnion.PreviouseditionsoftheOutlookassumedthatdevelopedeconomiescontribute0.7%oftheirnationalincometoofficialdevelopmentassistance,byfarthebestknowninternationaltargetintheaidfieldassistance(UNFCCC,2016).ThisrepresentsaroundUSD1trillionperyear(2021USD).Internationalcollaborationfundsaredistributedtogovernmentsthroughthreepillars.Theenablingandsocialpillarconsidersinclusivedevelopment;theinternationaljusticepillaraddressesaspectsoffossilfueldependency;andtheinternationalequitypillarfocusesontheequitydimensionoftheenergytransition.Additionalpoliciesareincludedtodirecttheuseofthesefundstowardssocialvaluecreationandsupportfortheenergytransitioninrecipientcountries.Toexploretheoptionofintensifiedinternationalcollaborationinthe1.5°CScenario,asensitivityanalysisisconductedtoassesstheeffectofboostingcollaborationthroughchangesindistributionalpolicies(seeAppendix).Thenextsectionpresentstheresultsintermsofeconomicgains,asmeasuredbyGDPunderthe1.5˚CScenarioattheglobalandregionallevels,andinselectedcountries.Itfindsthatinternationalfinancialcollaborationflowswouldfacilitatemoreequitableoutcomes.BydisaggregatingtheGDPresultsbydrivers,thissectionfurtherclarifiesthestructuralaspectsbehindthesocio-economicfootprint.2.4GDPresultsattheglobalandregionallevels,andinselectedcountriesThesystematicadoptionofrenewablesandimprovementsinenergyefficiency,combinedwithprogressivepolicies,holdgreatpromiseforboostingglobalsocio-economicindicatorsastheenergytransitionprogresses.Between2023and2050,theworldcouldseeanaverageannualincreaseinGDPof1.5%overthePESunderthe1.5°CScenario(Figure2.3,leftpanel).ThechiefmacroeconomicdriversofGDPdifferencesthroughoutthetransitionperiod(i.e.2023-2050)areshowninFigure2.3.Publicinvestmentisthemostpowerfulofthese.Investmentintransitionactivitiesencompassesallspendingonrenewableenergyinboththepowerandend-usesectors,alongwithinvestmentsinenergyefficiency,gridandelectricvehicle(EV)infrastructure,energyflexibilityandsystemintegration,includinghydrogen.Suchinvestmentsgenerateincreaseddemandinvariouseconomicsectors,includingequipmentmanufacturing,construction,andserviceslikeretail,business,andIT.Thisresultsinapositiveoverallimpact,makingasignificantcontributiontoGDPgrowth.Governmentexpendituresplayacrucialroleinsupportingthisenergytransitionbyaddressingspecifictransitionneeds,encouragingprivatesectorinvestments,andensuringexpendituresaredirectedtowardsajustandequitabletransition.Publicinvestmentcanalsobeusedasatoolforeconomicstabilisation.Duringeconomicdownturns,thegovernmentcanincreaseitsspendingtocounteractreducedprivatesectorspending,helpingtomaintainemploymentandeconomicactivity.ThisisakeyaspectofKeynesianeconomictheory(andalsothetheorythemodelisbasedon).42VOLUME2CHAPTER2Publicinvestment–supportedbygreaterprivatespending–playsapivotalroleindrivingGDPgrowth,aligningwiththecollectivevisionforsustainableeconomicdevelopment.FIGURE2.3GlobalGDP,averagepercentagedifferencebetweenthePESand1.5°CScenario,2023-2050GDPdierencewithPES(%)2.01.51.5%1.01.00.50.50.4%0-0.50-0.520501.5°CScenarioChangeinGDPInduced:social-directedpaymentsInduced:aggregatepricesOtherindirectandinducedeectsInducedandindirect:otherPublicinvestmentandspendingPrivateinvestmentTradeNote:GDP=grossdomesticproduct;PES=PlannedEnergyScenario.43WORLDENERGYTRANSITIONSOUTLOOK2023Underthe1.5°CScenario,globalGDPgainswouldnotbeassignificantovertimeaftertheinitialboostfromfront-loadedinvestments,butinthelastdecadeoftheperiod(i.e.2041-2050),GDPwouldstillbe0.9%greaterthaninthePES(Figure2.4).Theaverageannualamountofadditionalprivateinvestmentgeneratedthrough2030bythe1.5°CScenarioworksouttoUSD100percapita;butsoonafterthefirstdecade,thiseffectdissipatesastherelativeimpactofprivatefront-loadedtransition-relatedinvestmentstapersoff,inadditiontothedropininvestmentinfossilfuelsupplyanditsnegativeimpactonothersectors.Asdiscussedintheprevioussection,the1.5°CScenariosupportsinternationalcollaborationfinancedbycountriescommensuratewiththeircontributiontoclimatechange8andtheirwealth,asinpreviousIRENAreports(IRENA,2021b,2022c;IRENAandAfDB,2022a).Thefinancialflowsgeneratedsupporttransition-relatedpublicinvestmentandexpendituretoboostdomesticsocialspendingandaddressinequality(IRENA,2022c).Benefittingfromlargerflows,worldwidegovernmentalsocialspendingrisesoverthetransitionperiod(i.e.2023-2050)comparedwiththePES,increasingbyanannualaverageofUSD422billion(2021USD).Becauseofthis,publicandpersonalserviceslikehealthcare,educationandpublicadministrationbenefitfromgovernments’greaterdiscretionaryspendingpower.Overthefirstdecadeofthetransition(2023-2030),privateinvestment–stimulatedinpartbygreaterpublicspending–issignificantlyhigherunderthe1.5°CScenariothanunderthePES,withanannualaveragedifferentialin2021USDofaroundUSD820billion,equivalenttoaround37.5%ofthedifferenceinGDPbetweenthetwoscenarios(seeFigure2.4).FIGURE2.4AveragepercentagedifferenceinglobalGDPbetweenthePESand1.5°CScenario,bydriverandbydecadeGDPdierencewithPES(%)1.2%0.9%GDP32041-2050Publicinvestment2.4%andspendingPrivateinvestment2TradeInduced:1social-directedpaymentsInduced:0aggregatepricesInducedandindirect:-1other2023-20302031-20401.5°CScenarioNote:GDP=grossdomesticproduct;PES=PlannedEnergyScenario.8BasedontheClimateEquityReferenceCalculator(https://calculator.climateequityreference.org/).44VOLUME2CHAPTER2Otherindirectandinducedeffects,brokendownintheright-handpanelofFigure2.3,togetherformthesecond-strongestfactorindrivingdifferencesinGDPthroughoutthetransitionperiod.Thesocial-directedpayments(revenuerecycling)toaddressthe“distributional”dimensionarethemostinfluential,followedbyinducedaggregateprices.Theinducedandindirect:othercomponenthasamildnegativeimpactonGDPdifference.Theeffectsoftheseindirectandinducedeffectsarediscussedingreaterdetailbelow.Inducedsocial-directedpaymentshaveapositiveimpactovertheentiretransitionperiod(seeFigure2.4).Inthe1.5°CScenario,taxrevenuesleftoveraftercoveringtransition-relatedinvestmentandotherpolicyexpensesareassumedtoberedistributedtohouseholdsintheformofpaymentsunderarevenuerecyclingapproach,therebyraisinghouseholdconsumption.Domesticresponsestoshiftsincarbonprices,technologyprices,powersectorcapacity,fossilfuelsubsidiesandinvestmentexpendituresareallreflectedintheroleofinducedaggregateprices.Duetofront-loadedinvestmentinrenewablesandthe[still]significantroleofincreasinglyexpensivefossilfuelsinpowergeneration,higherelectricitypriceswouldcountersomeofthebenefitsfrominducedsocial-directedpayments.TradeimpactsonGDPareshapedbychangesinfueltradeandresponsestotradeonothercommodities.Whiletheseeffectsareminorglobally,balancingoutbetweenregions,theycanbesignificantatthenationalorregionallevel.Netfueltradenegativelyimpactstheglobaleconomyformostoftheforecastperiod.Underthe1.5°CScenario,lowerconsumptionofmanufacturedfuelsleadstovariedimpacts:somecountriesseereducedfuelexportrevenues,whileothersbenefitfromdecreasedfossilfuelimports,boostingtheirGDP.Overthetransitionperiod,fueltrade'scontributiontoGDPgrowthbecomesnegative.Incontrast,the1.5°CScenarioaffectsnon-fueltradebyalteringprice-drivencompetitivenessandtradedynamics,withglobalchangesinnon-fueltradeexpectedtobepositivethroughouttheforecastperiod.However,itisnotlargeenoughtooffsetthenegativeimpactoffueltrade,resultinginanetnegativeimpactfromtrade.Itisimportanttohighlightthatthesocio-economicoutcomesdiscussedheredonotaccountfortheeffectsofclimatechange–acrucialfactordrivingtheenergytransition.Themacroeconomicmodelusedinthisanalysisoperatesundertheassumptionthatclimatechangedoesnotaffecteconomicactivity.Consequently,boththescenarioscontinueontheirrespectivemacroeconomictrajectorieswithoutconsideringclimatechangeeffects.Elsewhere,IRENAhasincorporatedintoitsmacroeconomicmodellingaclimatedamagemethodologybasedonBurkeetal.(2015,2018)(seeBox2.2).Theglobalanalysis,however,hideshugegeographicaldisparities.ForthecountriesoftheGroupofTwenty(G20)theinvestmentdriverisgenerallythestrongestfactorinGDPdifferencesbyscenario(Figure2.7a).ThisistrueforseveralimportantG20countries,notablyIndiaandChina.InsomeG20countries(Canada,ChinaandSouthAfrica),theimpactofthetradedriveronGDPdifferencesisas,ormore,importantthaninvestment,duetotheireconomicstructures.Contrarytoresultsobtainedinmostoftheadvancedeconomiesinducedsocial-directedpaymentsarebecomingmoreimportantinemerginganddevelopingcountries,wheretheyaresometimesthedominantfactorinmodelledGDPdifferences(Figure2.7b).Thecauseisinternationalfinancialresourcesunderthe1.5°Ctoaddressthewelfaregapsidentifiedinpreviousmodellingexercises.Theyoccurmainlyinthesocialdimension(socialexpenditure)andthedistributionaldimension,andtoalesserextentintheeconomicdimension(consumptionandinvestment).45WORLDENERGYTRANSITIONSOUTLOOK2023BOX2.2TheimpactofclimatedamageontheeconomyTheGDPresultspresentedinthischapterdonotfactorintheimpactofclimatechangeonaggregatedeconomicactivity.Butclimatechangewillhavenegativeimpacts,varyingacrosslocationsduetodifferingclimatevulnerabilitiesandregionaldistributionofwarming,andthesewillincreaseovertime.Pastemissionsforceacertaindegreeofclimatechangealready,butthehigherthemitigationoffuturegreenhousegasemissions,thelowerthelevelofadditionalglobalwarmingandassociatedclimatedamage.Hence,climatedamagewillbehigherunderthePlannedEnergyScenario(PES)thanunderthe1.5°CScenario,butsignificantinbothcases.IRENAstartedexploringtheimplicationsofclimatedamageonoveralleconomicactivityinGlobalEnergyTransformation(IRENA,2019b).Subsequently,theagencypublishedglobalresultsincorporatingupdatestothemethodology,includingadditionaldataontheimpactoftemperaturechangesoneconomicperformance(IRENA,2021b).aTheestimateisconsideredconservativebecausesomeeffectsarenotyetprominentormeasurableinhistoricaldata,suchastheintensificationofextremeevents(wildfires,floodingandtropicalstorms),sealevelrise,tippingpoints,tradedisruptionsandknock-onpoliticalandsocialeffects(e.g.massmigration)(IRENA,2019b).FIGURE2.5Climatedamageby2100underthePESand1.5°CScenario:Global,AfricaandEU27GDPlossduetoclimatedamages(%)AfricaEU27Global0-10-20-40-50-60-70PES1.5°CPES1.5°CPES1.5°CScenarioScenarioScenarioNote:1.5S=1.5°CScenario;EU=EuropeanUnion;GDP=grossdomesticproduct;PES=PlannedEnergyScenario.46VOLUME2CHAPTER2Figure2.5presentstheGDPlossduetoclimatedamagethatcouldbeexpectedby2100underthePESand1.5°CScenarioatthegloballevelaswellasforAfricaandtheEU27,tworegionswithhighlydiverginglevelsofeconomicdevelopmentandemissions.Althoughclimatedamageunderthe1.5°CScenarioaresignificant(representinga26%lossofGDPinAfrica),followingthePESemissionstrajectorywouldleadtoacatastrophiclossofmorethan60%ofAfrica’sGDPby2100.Figure2.5alsoreinforcesthepointonclimateinequalitydiscussedinChapter3ofthisreport,withclimatedamageinemerginganddevelopingcountriesbeingmuchhigherinrelativetermsthanthoseexperiencedinadvancedeconomies.ClimatedamageismuchhigherunderthePESthanunderthe1.5°CScenario.Figure2.6presentsthedifferenceinGDPbetweenthe1.5°CScenarioandPESby2050,firstwithoutaccountingfortheimpactofclimatedamage(asinthischapter),andthenfactoringthemin.Atthegloballevel,theincorporationofclimatedamagewidenstheGDPbenefitoftransitioningfrom0.9%to3.6%.aThemethodologyisbasedonastatisticalanalysistoderiveanon-lineardamagefunctionthatmapstemperaturechangestoeconomiclosses,providinggeographicaldetailsofclimatedamage(Burkeetal.,2015,2018).Theworkwasinformedbyanextendeddatasetatasubnationallevelinvolvingover11000districts(BurkeandTanutama,2019)FIGURE2.6GDPbenefitsofthetransitionby2050,withandwithoutaccountingforclimatedamage:Global,AfricaandEU27DierenceinGDPwithPES(%)AfricaEU27GlobalWithout15climatedamages12With9climatedamages630PESPESPESNote:EU=EuropeanUnion;GDP=grossdomesticproduct;PES=PlannedEnergyScenario.47WORLDENERGYTRANSITIONSOUTLOOK2023FIGURE2.7GDPinselectedcountries/regions,averagepercentagedifferencebetweenPESand1.5˚CScenario,bydriver,2023-2050GDPdierencewithPES(%)1412108.3%86.0%642.8%21.5%1.3%1.3%0-2-1.4%-4-6G20BrazilCanadaChinaIndiaSouthAfricaGlobal1.5°CScenarioGDPPublicinvestmentandspendingInduced:social-directedpaymentsPrivateinvestmentInduced:aggregatepricesTradeInducedandindirect:otherNote:G20=GroupofTwenty;GDP=grossdomesticproduct;PES=PlannedEnergyScenario.48VOLUME2CHAPTER2FIGURE2.7GDPinselectedcountries/regions,averagepercentagedifferencebetweenPESand1.5˚CScenario,bydriver,2023-2050(continued)GDPdierencewithPES(%)5040302015.3%14.0%12.0%107.7%5.4%2.6%0-3.9%-10-20-30CentralEastAfricaSouthernWestAfricaLatinSoutheastNorthAfricaAfricaAfricaAmericaAsiaGDP1.5°CScenarioPublicinvestmentandspendingInduced:social-directedpaymentsPrivateinvestmentInduced:aggregatepricesTradeInducedandindirect:otherNote:ExcludingArgentina,BrazilandColombia;G20=GroupofTwenty;GDP=grossdomesticproduct;PES=PlannedEnergyScenario.49WORLDENERGYTRANSITIONSOUTLOOK20232.5EmploymentattheglobalandregionallevelsThissectionprovidesin-depthfindingsfrommodellingoftheemploymentimpactofrenewablesintheenergysectorandtheeconomyasawhole.Thefindingsarepresentedattheglobalandregionallevelsandforselectedcountrieswithinregions.Theyhighlightpotentiallabourmarketmisalignmentsacrosstheenergytransition.Economy-wideemploymentThe1.5°CScenariowouldleadto,onaverageannualterms,1.7%higheremploymentthanthePESoverthe2023-2050period(Figure2.8).Globally,economy-wideemploymentwouldbe1.8%greateronaverageintheyearsto2040,butonly1.5%higherinthefinaldecade(2041-2050)(Figure2.9).Theeconomy-wideemploymentdifferenceswouldbemainlydrivenbyinvestmentandotherindirectandinducedeffects,whiletradewouldhaveaminorimpact(Figure2.8).Intheyearsto2030,theinvestmentdriverplaysthemostimportantroleinthedifferencesinemployment,whileotherindirectandinducedeffectsbecomethemaindriverfromtheseconddecade(2031-2040)(Figure2.9).FIGURE2.8Globaleconomy-wideemployment,averagepercentagedifferencebetweenthePESand1.5°CScenario,bydriver,2023-2050EmploymentdierencewithPES(%)2.01.7%Changeinemployment1.5Otherindirectandinducedeects1.0TradePublicinvestmentandspendingPrivateinvestment0.501.5°CScenarioGlobalNote:PES=PlannedEnergyScenario.50VOLUME2CHAPTER2FIGURE2.9Averagepercentagedifferenceinglobaleconomy-wideemploymentbetweenthePESand1.5°CScenario,bydriverandbydecadeEmploymentdierencewithPES(%)2.01.8%Changeinemployment1.8%1.5%Otherindirectand1.5inducedeects1.0Trade0.5PublicinvestmentandspendingPrivateinvestment0-0.52031-20402041-20502023-20301.5˚CScenarioNote:PES=PlannedEnergyScenario.Otherindirectandinducedeffectsboostjobcreationduringthetransitionperiod,reaching35millionin2050underthe1.5°CScenario.Theeffectisdrivenbyrisingwagesinnon-energysectorsintheyearsbefore2030becauseoflabourshortagescausedbyincreaseddemand.Intheseconddecade(2031-2040),consumerspendingwillbethemainfactoramongtheotherindirectandinducedeffects,drivenbyrippleeffectsfromfront-loadedtransition-relatedinvestmentandsocial-directedpaymentsusedforconsumerspending.ComparedtothePES,consumerspendingisexpectedtocreatearound22millionjobsinthe1.5°CScenarioby2050.Consumptionwouldmovefromfuelstorestaurants,hotels,andothergoodsandservices,suchaseducation,personalcostsandfinancialservices.Higherconsumerspendingandchangesinitspatternswillproducemorejobcreationthanjoblossincertainsectors,includingfuelextractionactivities.Greaterpublicinvestmentandspendingintransition-relatedinitiatives(e.g.energyefficiency,electrification,renewables)leadstomorejobsacrossthetransitionperiod.Morepublicinvestmentisallocatedtoservice-orientedsectors,suchasbuildingspaceredesign,energymanagementsystemupgradesandretrofits.51WORLDENERGYTRANSITIONSOUTLOOK2023ComparedwiththePES,thetransitionunderthe1.5°CScenarioleadstogrowingsocialspendingandsignificantnewjobcreationacrosstheworld(Figure2.10),largelybecauseofincreasedinternationalfinancialflows.Jobcreationwouldreach19millionby2050.ThisisbecauseaquarteroftherevenuesfromtheinternationalfinancialflowswouldbeusedforadditionalsocialspendingandinvestmentoverthatoccurringunderthePES.Averagedovertheentiretransitionperiod,privateinvestmenthasnonetinfluenceoneconomy-wideemploymentatthegloballevel,primarilybecauselowerinvestmentinfossilfuelsintheyearsafter2030wouldoffsetthepositiveeffectofthefront-loadedtransition-relatedinvestmentinthefirstdecadeoftheperiod.Theeffectissignificantlynegativeafter2030,asthefossilfuelphaseoutaccelerates.Withoutgovernmentalintervention,9.1millionjobswillbelostinfossilfuelsupplyunderthe1.5°CScenario.Some16millionjobswillbelostinfuelextractionby2050.Re-trainingemployeesfornewjobsisnecessarytopreventsubstantialdisruptionstolivingstandards.Itisimportantforpolicymakerstoconsidertheregionalimpactofthesejobs,whicharelargelyconcentratedinafewkeyregions(Figure2.10).FIGURE2.10Averagepercentagedifferenceineconomy-wideemploymentinselectedregionsbetweenthePESand1.5°CScenario,bydriver,2023-2050EmploymentdierencewithPES(%)3.53.03.1%Changeinemployment2.51.6%Otherindirectandinduced21.7%eects1.5Trade1.00.9%Publicinvestment0.50.1%andspending00.2%Privateinvestment-0.5-1.0-1.5-2GlobalAfricaG20NetNorthAfricaNorthoilexporterAmerica1.5°CScenarioNote:G20=GroupofTwenty;PES=PlannedEnergyScenario;Netoilexporter=Denmark,Norway,Canada,RussianFederation,Mexico,Brazil,Argentina,Colombia,SaudiArabia,Nigeria,Malaysia,Kazakhstan52VOLUME2CHAPTER2EmploymentintheenergysectorTheanalysisofenergysectorjobspresentedherebuildsonIRENA’spreviousresearch(IRENA,2016,2017,2018,2019a,2020,2021b,2022d,2022c;IRENAandAfDB,2022a).Thepurposeofmuchofthatpreviousworkhasbeentoinformpoliciestomaximisetheemploymentbenefitsoftheenergytransition.Thesepolicieswouldincludemeasurestocorrectmisalignmentsofskills,timing,geography,andtheindustriesinwhichjobsarecreatedandlost.Becausethemodellingapproachusedtoestimatesocio-economiceffectsholdsenergybalancesandenergy-relatedinvestmentsunchangedforthe1.5°CScenariosensitivity,energysectorjobsareunaffectedbytheadditionalpolicylayersdiscussedinAppendix.Asaresult,the1.5°CScenarioisusedfortheresultsreportedbelow.First,findingsatthegloballevelarepresented,followedbydetailsoncertainregionsandcountries.Energysectorjobscouldreach101millionand134millionin2030underthePESand1.5°CScenario,respectively,comparedwith67millioncurrently(Figure2.11).BetweenthePESand1.5˚CScenario,thesubstantialjoblosses(around12million)inconventionalenergyjobs(fossilfuelsandnuclear)aremorethanoffsetby2030bygainsinrenewables(around11million)andotherenergy-transition-relatedsectors(energyefficiency,powergridsandflexibility,vehiclecharginginfrastructure,andhydrogen,ataround34million).Thisismainlyduetothefront-loadedinvestmentsintransition-relatedsectorsinthefirstdecadeofthetransitionperiod.Employmentinrenewableswouldincreasefromaround14millioncurrently(IRENAandILO,2023a)to19millionand30millionunderthePESand1.5°CScenario,respectively.FIGURE2.11EnergysectorjobsatthegloballevelunderthePESand1.5°CScenario,2021-2050Globaljobs(inmillions)1401201008060Conventionalenergy40Othertransition-relatedsectors20Renewableenergy0202120302050PES1.5°CPES1.5°CScenarioNote:PES=PlannedEnergyScenario.Scenario53WORLDENERGYTRANSITIONSOUTLOOK2023Underthe1.5°CScenario,energysectorjobswouldrisetoaround140millionin2050,40millionhigherthanunderthePES.Countriesheavilyreliantonfossilfuelsfacevariouschallenges,notablyinensuringthateveryonebenefitsfromthetransition.Theimpactonsocietyvariesbasedonhowdeeplyfossilfuelsareintegratedintoaneconomy.Itisessentialtoaddressthesedependencies,withaspecialfocusonthemostvulnerable.Underthe1.5°CScenario,energysectorjobswouldrisetoaround140millionin2050,40millionhigherthanunderthePES,owingtogrowinginvestmentsinnewtransition-relatedtechnologies,particularlyenergyefficiency,powergridsandenergyflexibility,andrenewables.ThePESwouldmaintain36millionenergysectorjobsinconventionalenergy.The1.5°CScenariocutsthisto19millionjobs,indicatingabigshifttowardscleanerenergy.Countriesheavilyreliantonfossilfuelsfacevariouschallenges,frommovingawayfromfossilfuelstoensuringeveryonebenefitsfromthetransition.However,ifnotmanagedwell,somegroupsmightbeleftbehindduetotheintricatenatureofsuchchanges.Theimpactonsocietyvariesbasedonhowdeeplyfossilfuelsareintegratedintotheeconomy.Followingtheevolutioninpublicinvestmentandspendingoutlinedinsection2.1,the1.5°CScenarioboostsothertransition-relatedsectorjobsfrom43%ofenergysectorjobs(43millionjobs)underthePESto58%(81millionjobs).Underthe1.5°CScenario,28%ofenergysectorjobs(39millionjobs)areinrenewablesin2050,comparedwith21%(21millionjobs)underthePES.Renewableenergyoccupationswouldthusgrowsignificantly.54VOLUME2CHAPTER2Figure2.12showstheregionalbreakdownofenergysectorjobsintheyear2050underthe1.5°CScenario.In2050,around55%ofalljobsintheenergysectorwouldbeinAsia,while15%wouldbeinSub-SaharanAfrica,12%inEuropeand10%intheAmericas(i.e.NorthAmericaandLatinAmerica).Regionalvariationsresultfromthefactthatcountriesbeginthetransitionfromdifferentstartingpoints,asdefinednotonlybytheirpre-existingsocio-economicstructures,butalsobecauseofthewidedifferencesintheirnationalpoliciesandpracticesrelatedtothetransition.By2050,renewableswillaccountforabout28%ofAsia’senergysectorjobs;thecorrespondingfiguresare36%intheAmericas,33%inEuropeandjust25%inSub-SaharanAfrica.IntheAmericas,36%oftheothertransition-relatedjobsaresupportedbypowergridsandenergyflexibilityefforts(i.e.grids,heatpumps,hydrogen,etc.).Energyefficiencyaccountsfor39%ofenergysectorjobsinAsiaand30%Europe;inSub-SaharanAfrica,thefigureis17%.Underthe1.5°CScenarioby2050,thefossilfuelindustrywillstillberesponsiblefor47%ofenergysectorjobsinSub-SaharanAfrica,9%inAsia,5%inEuropeand4%intheAmericas.FIGURE2.12Energysectorjobsinthe1.5°CScenario,byregion,2050RestofEastEuropeEU27+UKRestofAsia7%5%Asia4NorthAmericaMiddleEastand%NorthAfrica7%16%LatinAmericaSub-SaharanSoutheast29%AfricaAsia6%Oceania15%10%0.4%%ShareinglobalenergysectorjobsConventionalenergyOthertransition-relatedsectorsRenewableenergyNote:EU=EuropeanUnion;UK=UnitedKingdom.55WORLDENERGYTRANSITIONSOUTLOOK2023EmploymentinrenewableenergyUnderthe1.5°CScenario,therenewableenergysectorispredictedtogrowsignificantlyby2050,creatingabout40millionjobsworldwide(Figure2.13).Thisremarkablethree-foldincreasefromthe2021figureofaround13.6million(IRENAandILO,2023b)reflectsintensifyingeffortstomitigatetheeffectsofclimatechangebyswitchingtorenewablesources.Indeed,thedeploymentofrenewableenergytechnologieslikesolar,windandbioenergyishelpingtocurbemissionsofGHGs,whilesimultaneouslyboostingtheeconomyandprovidingnewopportunitiesforemploymentintheenergysector.Solarenergyjobsareexpectedtoriseto18million(around45%ofrenewableenergyjobs)by2050underthe1.5°CScenario–almostafour-foldincreasefrom2021.Windenergywillalsoseehighjobcreation;employmentisexpectedtorisefive-foldfrom2021,reaching6million(around17%ofallrenewableenergyjobs)underthe1.5°CScenarioby2050.Theexpansionofvariablerenewableenergy(solarandwind)canbeattributedtocostreductions,efficiencygainsandpolicyincentivesthathavemadesolarenergymoreaccessibleandaffordable.Thespreadofutility-scaleandrooftopsolarsystemsispredictedtocreatemanyjobs,highlightingsolarenergy’ssignificanceintheenergytransitionandeconomicdevelopment.BioenergyFIGURE2.13RenewableenergyjobsatthegloballevelinthePESand1.5°CScenario,2021-2050Globaljobs(inmillions)403020OtherWind10SolarwaterheaterSolar(PVandCSP)0Hydro2021Bioenergy20302050PES1.5°CPES1.5°CScenarioScenarioNote:“Other”includesgeothermalandtidal/wave.CSP=concentratedsolarpower;PES=PlannedEnergyScenario;PV=photovoltaic.56VOLUME2CHAPTER2jobswillgrowfrom4millionjobsin2021(33%ofrenewablejobs)tomorethan10millionin2050(27%ofrenewablejobs).Thisgrowthhighlightsthediverseapplicationsofbioenergyingeneratingelectricity,heatingandtransportation.SustainablemanagementandutilisationofbiomassresourcescontributetoareductioninGHGemissions,whilecreatingjobsinagriculture,processingandenergyproduction.Figure2.14showstheregionalandtechnologicaldistributionofrenewablejobsthrough2050underthe1.5°CScenario.Asiaholds55%ofglobalrenewableenergyjobsbythatyear,followedbyEuropeat14%,theAmericasat13%andSub-SaharanAfricaat9%.Solarenergyjobsareexpectedtoriseto18million(around45%ofrenewableenergyjobs)by2050underthe1.5°CScenario.FIGURE2.14Renewableenergyjobsinthe1.5°CScenario,byregion,205068RestofRestofEU27+UKEuropeAsiaEast%%AsiaNorthAmericaMiddleEastand5%NorthAfrica6%17%%ShareinglobalLatinSub-SaharanSoutheast26%renewableAmericaAfricaAsiaenergyjobsOceania8%9%12%Other0.5%WindSolarwaterheaterSolar(PVandCSP)HydroBioenergyNote:“Other”includesgeothermalandtidal/wave.CSP=concentratedsolarpower;PES=PlannedEnergyScenario;PV=photovoltaic.57WORLDENERGYTRANSITIONSOUTLOOK2023By2050,underthe1.5°CScenario,solarwillmakeupnearly66%ofrenewableenergyjobsintheMiddleEastandNorthAfrica,52%inAsiaandlessthan40%intheotherregions(38%inEurope,32%intheAmericasand28%inSub-SaharanAfrica).Bioenergygeneratesmorethan50%ofrenewableenergyjobsinSub-SaharanAfrica.Thecorrespondingfiguresare37%and30%intheAmericasandEurope,respectively,androughly19%inAsia.Windenergyaccountsforalmost27%ofrenewableenergyjobsinEurope,butjust19%and16%intheAmericasandAsia,respectively.InEastAsia,renewableenergyemploymentcentresonsolarandwindduetosubstantialinvestmentsdrivenbyambitiouselectricitygoals.Jobopportunitiesspanmanufacturing,tradeandservices,butsolarmanufacturingisincreasinglyautomated,limitingemploymentprospects.SoutheastAsiatakesadistinctpath,withtheemergenceofsolarmanufacturingandafocusonbioenergydrivenbydomesticinputsandlabour-intensiveagriculture.TherestofAsiafollowsamixedapproach,differentfromEastAsia'swindfocus.InLatinAmericaandtheCaribbean,bioenergycontributessignificantlytoregionalemploymentduetodomesticbiomassproduction,processingandbiofueldistribution.Transitionprocesses,comingontopofpre-existingeconomicstructures,willbringsignificantchanges,includingtothelabourmarket.Theenergytransitionmayhaveapositiveoverallimpactonemployment,butitisalsolikelytocauselabourmarketmisalignmentsasoldjobsarereplacedbynewonesandothersundergoadjustments.Policymakersmustanticipateandaddressthesechallenges.IRENAhasgroupedthesechallengesintofourtypesofmisalignmentthatneedtobecloselyexamined:temporal,spatial,educationalandsectoralmisalignments(Ferroukhi,CasalsandParajuli,2020).First,joblossesandgainsmayoccuratdifferenttimesandrates.Second,newjobsmaybeproducedinareas,regionsorcountriesdifferentfromthoseinwhichmostjoblossesoccur.Thisisespeciallytrueinareaswithlimitedeconomicdiversity.Third,althoughre-trainingprogrammesmayhelp,theskillsassociatedwithlostjobsmaynotbewhatemergingandgrowingsectorsarelookingfor,leadingtoeducationalmisalignments.Andfourth,thoseexpandingindustriesmayusemorerawmaterialsorintermediateinputsfromvarioussectorsthanthosesupplyingdecliningindustries,generatingsectoralmisalignments.Justtransitionpoliciesarerequiredtopreventthesemisalignmentsfrombecomingbarrierstotheoverallenergytransitionthatissoessentialtothefightagainstclimatechange.58VOLUME2CHAPTER2Asiaisestimatedtospearheadrenewableenergyjobgrowth,employing55%ofthesector'sworkforceby2050.Theresultspresentedinthissectionprovidedetailedinsightsintotheenergytransition’sglobalandregionalimpactsonemployment.Adequatepolicies–carbonpricing,fossilfuelsubsidyphase-outs,globalinternationalclimatefundsandrevenuerecycling–canmitigatenegativejobconsequencesintheglobaleconomyoverthecourseoftheenergytransition.Duringthattime,governmentswillneedtomatchlabourdemandandsupply,alignunemployedskillswithjobrequirements,anddistributetheburdensoftechnologicalchangeonemployment(Tirole,2017;WEF,2014).Notwithstandingsomechallenges,theoverallemploymentfindingsareveryencouraging.IRENA’ssocio-economicfootprintschemeemphasiseswelfareasaholisticindicatorfortransformationroadmaps,beyondGDPandemployment.Theagency’senergytransitionwelfareindex(IRENA,2021b,2022c;IRENAandAfDB,2022b)includesfivedimensionsofwelfare:economic,social,environmental,distributionalandenergyaccess.Thenextsectionwillshowthatthemultiplefacetsoftheenergytransitionleadtogreaterwelfareformostpeopleinmostofthecountriesandregionsoftheworld.59WORLDENERGYTRANSITIONSOUTLOOK2023CHAPTER03WELFAREIMPACTSOFTHEENERGYTRANSITIONVOLUME2CHAPTER3IRENAusesawelfareindextodelvedeeperintothesocio-economicanalysisoftheenergytransition.Theindexhasfivedimensions(economic,social,environmental,distributionalandaccess),eachinformedbytwoindicators(Figure3.1).Socio-economicimpactsarequantifiedtoallowadirectcomparisonofseveralscenarios.Theindex’sdimensionsprovideinsightsintohowsocio-economicoutcomescanbeimprovedthroughappropriatepolicymeasures(seeChapter2).Shortcomingspointtopossiblehurdlesthatpolicymakerswillneedtoaddressastheycontinuetoadvancetheenergytransition.FIGURE3.1Fivedimensionsand10indicatorsofIRENA’swelfareindexEnvironmentalSocialDimensionsDistributionalEconomicAccessCO2emissionsSocialBasicenergyWithinConsumptionexpenditureaccesscountry/regionandinvestmentIndicatorsEmnevinrtaon-MaterialsHealthimpactSuciencyAcrossNon-Indexlconsumption(pollution)countries/regionsemploymentSoIcnidaelxAccessbutDioistri-IndexIndexnaWELFAREEcoInndomexicINDEXlNote:CO2=carbondioxide.61WORLDENERGYTRANSITIONSOUTLOOK2023Enhancingoverallwelfarerequirespolicyactionwellbeyondtheswitchfromfossilfuelstorenewables.Thetechnologicalaspectsoftheenergytransitionhavebothdirectandindirectimpactsonoverallwelfare.Forexample,shiftingfromfossilfuelstorenewablesdirectlymitigatescarbondioxide(CO2)emissions,whichhasapositiveimpactontheenvironment.Atthesametime,thistransformationoftheenergysystemcreatesjobs(whichboostoverallconsumerspending)andconsumesmaterials(andtheresourcesfromwhichtheyareproduced),andthushasindirect,negativeenvironmentalimpacts.Enhancingoverallwelfarerequirespolicyactionwellbeyondtheswitchfromfossilfuelstorenewables.Thispointhasimplicationsforthe“how”ofthetransition.Additionalpoliciesarerequiredtosustainotherwiseshort-termbenefitstotheeconomyandenvironment,boostoverallsocialwelfare,distributebenefitsequitablyandexpandaccesstowardsthegoalofinclusivedevelopment.9ThischapterforecastshowthedimensionsoftheIRENAEnergyTransitionWelfareIndexmightbeaffectedbytheactionstakenalongseveralofIRENA’stechnologytransitionpathways(section3.2).Itthenoffersdetailedobservationsabouteachdimension,andsketchesimplicationsforstructuralpoliciesneededbeyondtheenergysystem(3.3).3.1Overallwelfareindexunderthe1.5˚CScenarioThewelfareindexanditsfivedimensionsarestructuredonascalerangingfrom0(lowperformance)to1(highperformance).Figure3.2presentsaverageindexvaluesforselectedcountriesandregionsunderthePlannedEnergyScenario(PES)throughoutthetransitionthetransitionperiod(i.e.2023-2050).Thebest-performinglocationsbarelyreachavalueof0.5,reflectingpersistentsocio-economicgaps.Interestingly,countriesandregionsthatrankhighintheuseofenergyandmaterials,oraggregateeconomicactivity,donotnecessarilyrankthehighestintermsofwelfare.Oncesufficiencylevelsarereached,humanwelfareisprimarilyachievedthroughpoliciesandsocialstructuresthatchannelresourcestowardsoverallwell-being.Theshiftfromfossilfuelstorenewablesincreasessocialandenvironmentalwelfarebyreducingpollutionandmitigatingclimatechange.Tofurtherincreasewelfare,policiesmustaddressgapsinsocio-economicstructures.Figure3.3buildsonFigure3.2byaddingwelfareindexresultsforthe1.5°CScenario,againforthesamesetofcountriesandregions.ThesetransitionscenariosbringaboutsignificantwelfareimprovementsoverthePES.9Toaccuratelyassessthesocio-economicfootprintofaparticularcourseofaction,itisimportanttousetoolsthatcapturefeedbackacrosssystems(energy,economy,society,planet).Otherwise,theremaybeunintendedconsequencesasthenegativefeedbackfromonesystemcancelsoutthebenefitstoanother.620VOLUME2CHAPTER3GreeceArgentinaBrazilChinaGlobalIndonesiaJapanFranceIndiaEU27AfricaMiddle-EastNigeriaUSASwedenAustraliaDRCFIGURE3.2WelfareindexunderthePlannedEnergyScenario(PES)inselectedcountriesandregions,2023-2050WelfareIndex00.10.20.30.40.50.6GreeceArgentinaBrazilChinaGlobalIndonesiaJapanFranceIndiaEU27AfricaMiddleEastNigeriaUnitedStatesSwedenAustraliaDRCongoNote:DRCongo=DemocraticRepublicofCongo;EU=EuropeanUnion.63WORLDENERGYTRANSITIONSOUTLOOK2023FIGURE3.3WelfareindexunderthePlannedEnergyScenarioand1.5°CScenarioinselectedcountriesandregions,2023-2050WelfareIndex0.6PES1.5˚CScenario0.50.40.30.20.10Note:PES=PlannedEnergyScenario;Congo=DemocraticRepublicofCongo;EU=EuropeanUnion.Ingeneral,welfareimprovesovertimeinthe2022-2050periodacrossthescenarios.TheonlyexceptionisunderthePESintheearlyyearsoftheperiodinquestion,amidthelingeringimpactsofCOVID-19’sonsetandtheenergypricecrisis.The1.5°CScenario,withitsmitigationimpactsandpolicycomponentsfosteringinternationalcollaborationandredistribution,generatesfargreaterwelfareimprovementsthandoesthePESinbothregions.WhiletheIRENAEnergyTransitionWelfareIndexallowssimple,directcomparisonsacrossscenariosandregions,itdoesnotofferinsightsintothefactorsbehindresults,orintowhichpolicyactionswouldbringfurtherimprovements.Aseparateindex,foreachofthefivedimensions,helpstoclarifythis.Torepresentthisgraphically,IRENApresentstheoverallwelfareindex(shownatthecentreofaflower-shapedillustration)alongwiththefive-dimensionalindices(shownas“petals”).Figure3.4presentsthesefivedimensionsfortheworld,andregions(e.g.AfricaandtheEU27)underthe1.5°CScenarioin2050.WhiletheoverallindexvaluesinAfricaandEU27(0.41and0.42,respectively)arequitesimilar,theirdimensionalindicesdiffer.TheEU27performsbetterintheeconomic,socialandaccessdimensions.Africaperformssignificantlybetterintheenvironmentaldimension–despiteitsgreatervulnerabilitytoclimatechange–duetoitsverylowconsumptionofmaterials.64GreeceArgentinaBrazilChinaGlobalIndonesiaJapanFranceIndiaEU27AfricaMiddleEastNigeriaUnitedStatesSwedenAustraliaDRCongoVOLUME2CHAPTER3Atthegloballevel,Figure3.4showsthesignificantpotentialforimprovementinthesocialanddistributionaldimensions,withlessyetstillsignificantpotentialintheeconomicandenvironmentaldimensions.Thisisdespitethe1.5°CScenario’sstrongpoliciesaddressinggeneralwelfare,andthesocialanddistributionaldimensionsinparticular.Figure3.4illustratesthesignificantwelfareimprovements,overthePES,broughtaboutbythetransitionscenario.Figure3.5complementsthisbyprovidinginsightsintowhichwelfaredimensionsdrivetheseimprovements.AcrosstheglobeandparticularlyinAfrica,allfivewelfaredimensionscontributetotheimprovements.IntheEU27,improvementsaredrivenbythesocial,distributionalandenvironmentaldimensions(reflectthealreadyhighaccessandeconomicindicesunderthePES).Underthe1.5˚CScenariothewelfareindexisaround15%higherthanunderthePESatthegloballevel(Figure3.5).FIGURE3.4Overallwelfareindexanddimensionalwelfareindicesforthe1.5°CScenarioby2050:Global,AfricaandEU27WelfareIndexGlobal0.75EnvironmentalEconomic0.340.69Access1.00Social0.53DistributionalWelfareIndex00.240.50.8710.370.450.060.950.780.441.000.410.42000.100.490.50.511AfricaEU27Note:Thefivepetalsareonascalefrom0(lowperformance)to1(highperformance)andrepresenttheabsolutevaluesofthefivedimensionsoftheWelfareIndex.Thenumberinthecentreisalsoonascalefrom0to1andrepresentstheabsolutevalueoftheoverallWelfareIndex.EU=EuropeanUnion.65WORLDENERGYTRANSITIONSOUTLOOK2023FIGURE3.5WelfaredifferencesbetweenthePlannedEnergyScenarioandthe1.5°CScenario,bydimensionalcontributions,by2050:Global,AfricaandEU27DierenceinwelfareindexcomparedtoPES(%)2520EnvironmentalEconomic15AccessSocial10Distributional50GlobalAfricaEU271.5°CScenarioNote:PES=PlannedEnergyScenario;EU=EuropeanUnion.InAfrica,thebenefitsofthe1.5°CScenario(relativetothePES)arequitebalancedacrossalldimensionsexcepttheeconomicdimension,whichmakesasmallercontribution.Furtherimprovementswouldrequirestepstorestructuresocio-economicsystems,rethinkingeconomicactivityanditsdistributionsothatitbecomesfocusedonthecreationofsharedprosperity.Rethinkingeconomicstructuresandactivities,andthedistributionofitsbeneficiariescouldleadtosharedprosperity.66VOLUME2CHAPTER33.2AdeepdiveintothewelfareindexThissectionoffersobservationsaboutthefivewelfaredimensions:environmental,economic,social,distributionalandaccess.TheeconomicdimensionTheeconomicdimensionofthewelfareindexiscomposedoftwoindicators:(1)percapitaconsumptionandinvestmentand(2)non-employment.Thepercapitaconsumptionandinvestmentindicatorestablishesaminimumandanupperthresholdforinvestment.Attheminimum,investmentcoversbasicneeds,andinvestmentneednotextendbeyondtheupperthresholdtoreapwelfarebenefits.Alogarithmicscalerepresentshowwelfareisimprovedbyhigherlevelsofconsumptionandinvestment.Theinvestmentsrequiredtotransformtheenergysystemhavedirect,indirectandinducedeconomiceffectsthatimpactbothindicators.Thedistributionoftheseeffectsdependsonexistingeconomicstructures.Countriesmanufacturingtheequipmentneededfortheenergytransitionwillreapgreaterbenefits,whilethosethatdependonfossilfueltechnologiesthatarebeingphasedoutarelikelytoexperiencenegativeeffects.Policiesbeyondtheenergysystemcanalsoaffecttheeconomicdimension.Forinstance,internationalcollaborationandredistributivepolicymeasurescansignificantlyimproveconsumption,investmentandemployment.Contrastingtwodiverseregionsoftheworld,AfricaandtheEU27,intermsofpercapitaconsumptionandinvestment,AfricaderivesagreaterrelativeincreasethantheEU27.Still,Africa’sconsumptionandinvestmentremainwellbelowtheminimumthresholdofsufficiencyandthereislimitedconvergencebetweenthetworegions.In2022,consumptionandinvestmentlevelsintheEU27were19timeshigherthaninAfrica;by2050thisratiowouldbereducedto14and13,respectively,underthePESand1.5°CScenario.Atthelevelofsomeindividualcountries,thisgapisevenmorepronounced.10Addressingthesestaggeringinequalitiesrequiresfundamentalstructuralchangesinthesocio-economicsysteminwaysthatgofarbeyondtheenergyindustry.Thesecondindicatorinformingtheeconomicdimensionisnon-employment,atermthatencompassestheportionoftheworking-agepopulationthatisneitheremployednorreceivinganeducation.11Demographicdynamicsdriveupnon-employmentworldwideinallscenarios.Thisisbecausetheworking-agepopulationincreasesfasterthanemploymentandeducation/training.RelativetothePES,the1.5°Cscenariodampensthisrise,partlybecauseoftheadditionaljobsgeneratedintheenergytransition.Butthisismainlyduetotheemploymentimpactofadditionalpublicsocialinvestmentandspending(forinstance,ineducation,healthorincreasedfoodsecurity)andadditionalconsumptionenabledbysocial-directedpayments.Thedemographicdynamicsvarybycountryandregion.Forinstance,thegrowthoftheworking-agepopulationexceedsemploymentandeducation/traininginAfrica,whereasintheEU27,agingpopulationsandgreateravailabilityofjobsandeducation/trainingleadtoareductioninoverallnon-employment.Incountriesandregionswherenon-employmentisboundtoincreaseovertimeduetodemographictrends,additionalpoliciesaddressingstructuralsocio-economicissueswouldbeneeded.10ComparingSwitzerlandandtheDemocraticRepublicofCongo(DRCongo),forexample,theratiorisesfrom209in2022to228underthePESand226underthe1.5˚CScenarioin2050.OrbetweentheUnitedStatesandDRCongo,theratiois155in2022,andby2050itincreasesto165underthePES,andto148underthe1.5˚CScenario.11Non-employmentistheshareoftheworking-agepopulationthatisneitheremployednorineducation.67WORLDENERGYTRANSITIONSOUTLOOK2023ThesocialdimensionThesocialdimensionofthewelfareindexiscomposedoftwoindicators:(1)socialexpenditureand(2)thehealthimpactsofpollution.Socialexpenditureisexpressedaspercapitapublicexpenditureprovidingsocialvalue(i.e.policiesbeyondtheenergysystem).BecauseearliereditionsofIRENA’sWorldEnergyTransitionsOutlook(IRENA,2021b,2022a)identifiedhugegapsinthisindicator,thisreportincludespolicycomponentsintendedtoimprovewelfareoutcomes.Internationalcollaborationplaysanimportantrolehere,asdopoliciesearmarkinganddirectingpublicinvestmentandexpendituretowardssocialvaluecreation.TheimpactofthetransitionontheevolutionofpercapitasocialexpenditureinAfricaandtheEU27ispositiveforbothregions,withAfricaseeingagreatersocio-economicimpact.Andasisthecasefortheeconomicdimensionofwelfareimpacts,thereislimitedornoconvergencebetweenadvancedandemerging/developingeconomiesoftheworld.In2022,theratioofpercapitasocialspendingintheEU27tothatinAfricawas24,andby2050itwouldriseto35underthePESwhilestayingroughlyevenat25underthe1.5˚CScenario.Thesametrendisobservedatthecountrylevels.Hence,thepoliciesintroducedinthe1.5°CScenariohelpavoidfurtherdivergenceandevengreaterinequality.FIGURE3.6Globalpercapitahealthdamagesduetopollutants,2022-2050Healthdamages(2021USDpercapita)700600500400PES3001.5˚CScenario2001002025203020352040204520502020Note:PES=PlannedEnergyScenario.68VOLUME2CHAPTER3Climatechangeimpactsvaryduetoregionaltemperaturedifferences,climatevulnerability,andadaptationcapabilities.Thesecondindicatorinthesocialwelfaredimensionispercapitahealthdamagesduetopollution.Theseareestimatedbyconsideringthebenefitsdirectlylinkedtothephaseoutoffossilfuelsandexpansionofenergyaccess(specificallycleancooking).BoththePESandthe1.5°CScenariopresentadeclineinhealthdamages,butthelatterprovidesmuchgreaterbenefits(Figure3.6).By2050,however,healthimpactsarestillsignificant.Mitigatingthemwouldrequireafastertransitionandfossilfuelphase-out.Whileresultsvaryacrossregionsandcountries(linkedtotheirrespectiveenergybalances),theyalltrendaroundtheglobalaverage.TheenvironmentaldimensionTheenvironmentaldimensionconsistsoftwoindicators:(1)cumulativeCO2emissions12and(2)percapitamaterialsconsumption.Theeffectsofagivenamountofglobalwarmingdiffersignificantlyacrosstheglobe.Thisisbecauseoftheunevendistributionofregionaltemperatureincreases,anddifferencesinbothclimatevulnerabilityandabilitytoaddressclimatechangeimpacts.Therefore,thisindicatorconsidersemissionsasmodulatedbyeachcountry’sdegreeofvulnerability.Progressonthisindicatorislinkedtoboththetechnologicaltransition(deploymentofrenewablesandefficiency)andtheevolutionofaggregateeconomicactivity.Thelevelofaggregateeconomicactivityhasbeenassumedtobethesameacrossscenarios.13IRENA’sEnergyTransitionWelfareIndexconsidersvulnerability-adjustedcumulativeemissions14asanindicator(IRENA,2021a).Foragivenamountofglobalcumulativeemissions,andhenceglobalwarming,countrieswithrelativelyhighcumulative-adjustedemissionswillexperiencegreaterimpactsthancountrieswithlowervalues.Figure3.7presentsthevulnerability-adjustedcumulativeCO2emissionsinselectedcountriesunderthePESandthe1.5°CScenario.15AcountrylikeDemocraticRepublicofCongo(DRCongo)wouldexperiencealevelalmostthreetimesthatofNorway.Differingdegreesofclimatechangevulnerabilitycompoundimbalancesinsocio-economicsystems,tomagnifyoverallinequality.1612Fromtheenergysectorandalsofromlanduse,andlandusechangeandforestry.13Indicatedbythedirect,indirectandinducedimpactsofincreasedenergysectorinvestmentonoveralleconomicactivity,whichdrivetheGDPdifferencesdocumentedinsection3.2.14TheUniversityofNotreDameGlobalAdaptationInitiativeIndexwasusedtoevaluatevulnerability-adjustedcumulativeCO2emissions.Thisindexhas36indicatorsofvulnerabilityacrosshealth,food,ecosystem,habitat,waterandinfrastructuredimensions,and9indicatorsofreadinessacrosssocial,governanceandeconomicdimensions.15Emissionsforthesensitivitiesinthe1.5˚°CScenarioarethesame,sinceenergybalancesareunchangedusingthecurrentmethodology.16Distributionalimpactsaredirectlyembeddedinmosttransitionroadmaps.Forexample,mitigationscenarioswithnegativeemissionscouldleadtoadeteriorationoffoodsecuritysincetheyassumeamajorshareoftheemissionsmitigationburdenwouldrelyontheagriculture,forestryandotherlandusesector,suchasthroughbioenergywithcarboncaptureandstorage,andafforestation,inAsiaandAfrica(Fujimorietal.,2022;Hasegawaetal.,2018).69WORLDENERGYTRANSITIONSOUTLOOK2023FIGURE3.7Vulnerability-adjustedcumulativeCO2emissionsinthePlannedEnergyScenarioand1.5°CScenarioinselectedcountries,2023-2050GtCO15001250PES1.5°CScenario10007505002500DRCongoKenyaIndiaIndonesiaArgentinaTürkiyeChinaSpainUnitedStatesAustraliaGermanyNorwayNote:DRCongo=DemocraticRepublicofCongo;GtCO2=gigatonnesofcarbondioxide;PES=PlannedEnergyScenario.Thesecondindicator,percapitaconsumptionofmaterials17,dependsonthestructureoftheeconomyandonthelevelofaggregateeconomicactivity.Itrelatestosustainabilityintermsofhowtheresourcesavailablearebeingusedandisaproxyofimpactsonbiodiversity.Thecorrespondingindexincludesadevelopmentalallowanceof2.5tonnes/person-year,foraminimumamountofmaterialsrequiredforinclusivedevelopment.Theindexalsoincludesanupperthresholdforperformanceinexcessofplanetarylimits;ifpercapitamaterialsconsumptionexceedsthisvalue(12.5tonnes/person-year),theindexiszeroed(IRENA,2021a).Theupperthresholdisalreadywellsurpassedinmanycountries(Bringezu,2015;Hickel,2020),aclearindicationofthelackofsustainabilityembeddedinmanycurrenttransitionscenarios.Globally,thesustainableplanetaryboundaryofmaterialsconsumptionissurpassedbefore2035.17ThisiscurrentlyformulatedintermsofDomesticMaterialsConsumptionandincludesmetals,non-metallicmineralsandbiomass(wood,food)butexcludesfossilfuels.TheDMCquantifiesthetotalmassofmaterialextractionwithinanation’sborders,plusthemassofimports,minusthemassofexports.AlthoughDMCaccountsfortradetosomedegree,itdoesnotincludetheembeddedupstreammaterialextractionrequiredtoproducetradedgoods.70VOLUME2CHAPTER3However,hugedisparitiesexist.Somecountriesandregionsdonotevenreachthedevelopmentalallowancethresholdby2050whileothersfarovershootthesustainabilitylimit.18Forinstance,AfricaandIndiabarelyreach2tonnes,whiletheEU27isatabout15tonnesandAustraliaatcloseto40tonnes.TheratioofpercapitamaterialsusebetweentheEU27andAfricaisabout9overtimeandacrossscenarios.Forselectedcountries,thesedifferencesareevenmorepronounced.19ThedistributionaldimensionThedistributionaldimensionconsistsoftwoindicators:distribution(1)betweencountriesand(2)withincountries/regions.Eachoneofthemisinturninformedbytwosub-indicators,namelyincomedistributionandwealthdistribution(seriousinequalitiespersistinotheraspectsaswell,includingsocialspending,climateimpacts,materialsconsumptionandenergyuse).Giventhattremendousdistributionalinequalitiespersistunderanenergytransitionsolelyfocusedonatechnologicalpathway,severalofthepolicycomponentsconsideredinthisreportdirectlyaimatimprovingthedistributionaldimensionofwelfare.Theindicatorusedtomeasurethedistributionofincomeandwealthbetweencountriesisthequintileratio(QR).Thisistheratiooftheaveragepercapitaincome/wealthinthehighestquintileoftheworld’scountries,totheaverageinthelowestquintile,or–simplyput–therichest20%relativetothepoorest20%.AdistributionalimprovementischaracterisedbyareductionoftheQR.Figure3.8presentstheevolutionofincomeandwealthQRsacrossscenarios.Thetransitionscenarios(withtheiraccompanyingpolicymeasures)provideimportantandlastingdistributionalimprovementsinbothincomeandwealth.TheincreasingincomeQRunderthePESuntil2030isdrivenbyhighenergypricesandarisingcostoflivingasaconsequenceoftheCOVID-19recoveryandtheon-goinggeopoliticalshocks,effectsthatareassumedtolastuntil2026-2027.Thismeansthatintheyearsthrough2030,inflationremainsrelativelyhigh,hittinglow-incomehouseholdsandcountriesthehardest.Inthetransitionscenario,thistrendisneutralisedbyaboostininvestmentfromtheenergytransitionandinternationalcollaborationfinancialflows.Energytransitioninvestmentsarefront-loaded;therefore,itismainlyinternationalcollaborationthatprovidesthelastingdistributionalimpacts.18Thewelfareindexevaluatesdomesticmaterialsconsumption,whichdoesnotaccountforthematerialsembodiedinimportedproducts.Intermsofmaterialsfootprint,inequalityisstillmorepronounced.19BetweenLuxembourgandDRCongo,theratiowasalreadyaround235in2022butwouldsoartocloseto460by2050underthe1.5°CScenario.71WORLDENERGYTRANSITIONSOUTLOOK2023FIGURE3.8Globalincomeandwealthquintileratiosundervariousscenarios,2022-2050IInnccoommee((qquuiinnttiilleerraattiioo))220011881166PPEESS11..55˚˚CC1144SScceennaarriioo1122110022002255220033002200335522004400220044552200550022002200WWeeaalltthh((qquuiinnttiilleerraattiioo))3366332222882244PPEESS11..55˚˚CC2200SScceennaarriioo116622002255220033002200335522004400220044552200550022002200Note:PES=PlannedEnergyScenario;QR=quintileratio.Despitethesignificantdistributionalimprovementbroughtaboutbyinternationalcollaboration,incomeandwealthQRsremainhighby2050(foranincomeQRabove10andwealthQRabove15),andinternationalcollaborationlevelsconsideredhere20arealreadyhighrelativetocurrentstandards(Flavelle,2023).20About2021USD2trillion/yearonaveragein2023-2050.72VOLUME2CHAPTER3Inclusivedevelopmentrequiresprovidingthespaceforenergyservicestoincreasefrombasicneedstoenergysufficiency.TheaccessdimensionAccessisinformedbytwoindicators:(1)accesstobasicenergyand(2)progressionalongtheenergysufficiencylevel(assumedat20kilowatthours(kWh)/capita/dayinlinewiththeliterature(Millward-Hopkinsetal.,2020)21EnergyaccessinthetransitionscenariosisdrivenbytheSustainableDevelopmentGoalsagenda,withtheassumptionthatuniversalbasicenergyaccessisindeedachievedby2030.Butthewelfareindex’saccessdimensionacknowledgesthatbasicenergyaccessisonlyafirststeptowardsfullenergyaccess.Theindexthereforeincludesanotherindicatorwhichmeasuresprogressalongtheenergyladdertowardsenergysufficiency(necessaryforinclusivedevelopment).Theindicatorusedtomeasureprogressalongtheenergyladderispercapitatotalfinalenergyconsumption(TFEC).Theultimategoalisnotenergyconsumptionperse,butrathertheenergyservicesneededforadecentlife.Byincreasingoverallenergyefficiency,thesameamountofservicescanbeprovidedusingasmalleramountofenergy.Theenergyaccessindexusesasufficiencylimit22withanefficiencymodulationfunctionthatcapturestheeffectofenergyefficiencyimprovementsinreducingenergyconsumption.Figure3.9presentstheevolutionofpercapitaTFECinAfricaandtheEU27acrossscenarios.Twopointscanbemade:First,energyconsumptiondropsinbothregions,butthedropislargerandmoreimmediateinAfrica,despiteabaselinebelowsufficiency.Thisdropinenergyconsumptioncanbeattributedtogreaterenergyefficiency,andintheemerginganddevelopingcountriesitshouldprovideanopportunitytoprogressalongtheenergyladder.Second,percapitaenergyconsumptiondoesnotconverge.Infact,thehugedisparitiesatbaselinearefurtheramplifiedovertime.Ashasbeennotedseveraltimes,thepersistinginequalitiesinconsumptionofenergyaredirectlylinkedtostructuralsocio-economicconditions.Thelackofconvergenceandresultinginequalitiesaremorepronouncedatthecountrylevel.Figure3.10presentstheratioofpercapitaTFECinselectedregions/countriesacrossscenarios,indicatingrisingdivergenceovertime.The1.5°CScenarioshowsahigherlevelofdivergencethanthePES;by2050ratiosofpercapitaTFECinseveralcountriescouldbeashighas50-100.21Sufficiencylevelestimatedbetween11.6-30.4kWh/capita/dayacrossall119countriesdependingonthescenariosconsidered.22PercapitaTFEClevelsabovethesufficiencylimitdonotimprovetheindexvalue,oroverallwelfare.7312W10ORLDENERGY1.5˚CTRANSITIONSOUTLOOK2023Scenario8FIG2U02R0E3.9Ev2o0l2u5tionofp2e0r3c0apitatot2a0l3f5inalener2g0y4c0onsump2t0io4n5acrosss2c0e5n0ariosintheEU27andAfrica,2020-2050Kilowatthoursperperson-day(kWh/p-d)EU2785PES7565552025203020352040204520501.5˚C2020ScenarioKilowatthoursperperson-day(kWh/p-d)Africa14PES121082025203020352040204520501.5˚C20202045ScenarioNote:EU=EuropeanUnion;PES=PlannedEnergyScenario.Kilowatthoursperperson-day(kWh/p-d)EU2785PES756555202520302035204020501.5˚C2020Scenario74VOLUME2CHAPTER3FIGURE3.10Ratioofpercapitatotalfinalenergyconsumptioninselectedregions/countries,2022and2050RatioofpercapitaTFEC100806040200205020502022205020502022205020502022PES1.5°CPES1.5°CPES1.5°CScenarioScenarioScenarioEU27/AfricaUnitedStates/DRCongoUnitedArabEmirates/DRCongoNote:DRCongo=DemocraticRepublicofCongo;EU=EuropeanUnion;PES=PlannedEnergyScenario;TFEC=totalfinalenergyconsumption.Inclusivedevelopmentrequiresprovidingthespaceforenergyservicestoincrease.Evenasenergyefficiencyimproves,percapitaconsumptioncouldincrease.Intheemerginganddevelopingcountries,consumptionisreducedmoreunderthe1.5°CScenario(e.g.byover50%inDRCongo)thanintheadvancedeconomies(e.g.byabout20%inCanada),andtherequirementsforenergyreductionaremoreimmediate(i.e.by2030thedifferenceisevenhigher).Intoday’sglobaleconomiclandscape,itiscrucialtotailorpolicyoptionstoamplifysocialbenefits,includingincome,health,education,employmentandoverallwell-being.Asdiscussed,welfare,analternativetoGDP,isinstrumentalinevaluatingtheimpactsofaugmentedrenewableenergyuse.Asoutlinedinthischapter,theenergytransitionpromisessignificantbenefitsbeyondanincreaseinGDPandemployment.Forthesebenefitstopersist,however,theywillneedtobesupportedovertimebycomprehensivepolicies.Manysuchpolicieshavebeendiscussedacrossthechaptersofthisreport.Theenergytransitionisagradualprocess,andpolicymakerswillneedtothinkholisticallyandalignenergypolicywithotherareasofnationalpolicyoveranextendedperiodoftimetoensureaninclusiveandjusttransition–andtomeetacentralglobalobjective:energyjusticeforall.75WORLDENERGYTRANSITIONSOUTLOOK2023CHAPTER04CONCLUSIONSANDPOLICYRECOMMENDATIONSFORAJUST,EQUITABLEANDINCLUSIVEENERGYTRANSITIONVOLUME2CHAPTER44.1AholisticpolicyframeworkIncreasinglyrefinedandmaturetechnologieshavemaderenewableenergynotonlyattractivebutalsocost-competitivewithfossilfuels.Experienceinthedesignandapplicationofpoliciesandregulationssupportingthedeploymentofrenewablesisnowextensiveinmanypartsoftheworld.Theseareindeedencouragingdevelopments,yetprogressintransitioningtoacleanenergysystemstillfallsshortofthescaleandspeedneededtoadequatelyaddresstheclimatecrisis.Acentralcontentionofthisreportisthatthesocio-economicdimensionoftheenergytransitionrequiresmoreattention.Towinbroadsupportforcomprehensive,ambitiouspolicymeasuresthatwouldnotonlyextendbutalsoincreasethetransition’ssocio-economicbenefits,policymakersneedtodisseminateacompellingnarrative,usingthefactsathand.Climateambitionaboundsingovernmentalandcorporateannouncements,particularlyintherun-uptothe2023UnitedNationsClimateChangeConference(COP28).Frequentreferencetotheneedforajustandinclusivetransition,andnewfoundinterestamonggrowingnumbersofgovernmentsinindustrialpolicytoscaleuprenewableenergy,suggestthattheworldmaybeonthebrinkoftakingstrongaction.Thenextstepistoshoreuppopularandpoliticalsupportfortheenergytransition,rallyingpeoplearoundthecolossalglobalcollectiveeffortneededtoaddresstheunfolding“polycrisis.”Itwillnotbeeasytomeettoday’sintersectingchallengesthatincludethosestemmingfromclimatechange,thetransgressionofmoreandmoreplanetaryboundaries,andgrowingsocio-economicimbalancesandmisalignments,amongothers.Thisreporthasexploredwaysinwhichthepresentenergytransitiontrajectorycanbecorrected.Theenergytransitionrequiresacomprehensiveandholisticpolicyframework(seeFigure4.1).Mostimmediately,ofcourse,thisincludespoliciesthatdirectlyadvancethegenerationofrenewableenergy.Deploymentpoliciesfacilitatethescale-upofrenewableenergycapacities.Integratingpoliciesstipulatewaystofeedrenewablesintopowergridsandintegratethemintootherenergydeliverysystems.Publicinvestmentscanfundinfrastructuresuchastransmissionanddistributionsystems.Undertheheadingofenablingpolicies,publicfundscansupportlong-termenergyplanning,capacitybuildingandtraining,andresearchanddevelopment.77WORLDENERGYTRANSITIONSOUTLOOK2023ButasIRENA’sanalysishasdemonstrated,successfulpolicymakingcannotberestrictedtotheenergysectoralone,giventheindustry’sextensivelinkstotheeconomyatlarge,andthewaysinwhichtheeconomyisinextricablyconnectedtobroadersocietalandplanetaryissues.Ultimately,theenergytransitioncansucceedonlyifitisseenandexperiencedasjustacrossdifferentcommunities,countriesandregions.Thisimpliesthatpolicymakingmustbeembeddedin,orlinkedto,effortsto:narrowthevastinequitiesbetweenrichandpoor;makeeconomiesmoresustainable;andmitigatetheintensityandfrequencyofclimateandotherenvironmentalcalamitiesinthecomingdecades.Theenergytransitionalonecannotbeexpectedtoresolvetheselongstandinganddeeplystructuralproblems.Butholisticapproachescanhelptoidentifywaysinwhichdifferentdomainsofpolicymakingcanbeinterlinkedbetter.Forexample,itiscommonlyacceptedthattheclimateagendahastogohandinhandwitheffortstofulfiltheSustainableDevelopmentGoals,andthatprogressinonecanprovidepositiveimpetustotheother.FIGURE4.1AcomprehensivepolicyframeworkfortheenergytransitionDeploymentpoliciesIntegratingpoliciesEnablingpoliciesStructuralchangeandjusttransitionpoliciesInternationalENERGYandSouth-SouthECONOMYco-operationSOCIETYPLANET78VOLUME2CHAPTER4Distillingthediscussioninthepreviouschapters,thischapterfirstsummarisesthepolicymeasuresneededtobringaboutasuccessfulenergytransitionandensureequitableoutcomes(section4.2).Thisisfollowedbyadiscussionofpoliciesrequiredtopromotethebroader,structuralchangesintheeconomyrecommendedinearlierchapters(4.3).Finally,thechaptersketchessomeideastobringtheglobaleconomymoreinlinewithplanetaryboundaries(4.4).4.2SupportivepoliciesforequitableoutcomesAsdetailedinChapter2(specifically,Box1),IRENA’spolicymeasuresincludeanarrayofmeasuressuchasphasingoutfossilfuelsubsidieswhileprovidingsubsidiesfortransition-relatedtechnologieswhereneeded;adoptingcarbonpricingdifferentiatedbyeachcountry’sincomelevel;implementingregulationsandmandatestofurtherfacilitatethedeploymentofrenewables,electricvehicles,hydrogen,energyefficiencyandothertransition-relatedtechnologies;andundertakingdirectpublicinvestmenttosupportthetransition.Manyofthesekindsofpoliciesarethedomainofnationalgovernments,butsomewouldrequireahigherlevelofinternationalco-operation.Adifferentiatedcarbonpricingregimethattakesintoaccountthedivergingeconomiccapabilitiesofdifferentcountriescouldonlycomeaboutthroughintergovernmentalnegotiations,achallengingprocess.Underlyingtheanalysisistheargumentthatadditionalmeasures–beyondthosefocusedontechnologydevelopmentandrenewableenergydeployment–arerequiredtoensureequitableoutcomes.Forthepurposesofthisreport,thesemeasuresincludeinternationalcollaborationflowsofgreatermagnitude,progressivefiscalpolicies,alongwithredistributivepolicies.Publicfundsmayflowthroughintermediariessuchasgovernments,multilateralandbilateraldevelopmentfinanceinstitutions,andglobalfundssuchastheJustEnergyTransitionPartnerships(Figure4.2).Themoneycanflowasdirectinvestmentsinpublic-ownedtransitionassets,orbeusedtoattractandsupportprivateinvestment(e.g.throughgrants,rebatesandsubsidies;concessionalfinancingandguarantees[IRENAandCPI,2023]).Importantly,aportionofinternationalcollaboration(around10%)wouldbedirectedtowardsocial-directedpaymentsinsupportofsocialobjectives,includinganinclusivetransition.IRENA’spolicymeasuresincludeanarrayofmeasureswhileprovidingsubsidiesfortransition-relatedtechnologies.79WORLDENERGYTRANSITIONSOUTLOOK2023FIGURE4.2TheflowofpublicfinanceforajustandinclusiveenergytransitionFUNDINGInternationalSOURCESNationalGovernmentsSOFIs/SOEs/Localbanks/Co-operatives/foundations/InternationalandSouth-SouthcollaborationnationalDFIsMicrofinanceinstitutionsNGOs/crowdfundingplatformsMacroeconomicpoliciesIntermediaries(formulateandimplementfiscal,monetaryandforeignexchangepoliciesthatimpactthedeliveryofpublicfunds)MultilateralandExportcreditGlobalfundsCarbonfinancebilateralDFIsagencies(e.g.GCF,JETP)platformsGovernmentDebtincludingEquityanddirectFiscalpolicyandspendingexistingandnewownershipofassetsregulationsincludinggrants,issuances,creditincludingtaxesandPotentialrebates,subsidiesinstruments,levies,exemptions,instrumentsconcessionalacceleratedfinancing,depreciation,andguaranteesregulationssuchasPPAsDeploymentIntegratingEnablingStructuralpoliciespoliciespolicieschangeandjusttransitionpoliciesPOLICIESDirectinvestmentsInvestmentinSupportforlong-termPoliciestoaddressingovernment-infrastructureenergyplanning,misalignmentsownedassets,thatsupportcapacitybuildingandmarketfailuresdesigningandintegrationofandtraining,researchfundingpoliciesrenewablesintoanddevelopment,theenergytechnicalassistance,systemetc.Note:PES=PlannedEnergyScenario;Congo=DemocraticRepublicofCongo;EU=EuropeanUnion.BesidesthePlannedEnergyScenario(PES),withitsbusiness-as-usualpolicybasket,thisreporthasmodelledthesocio-economicfootprintofthe1.5˚CScenario,forecastingtheireffectsonwelfare,employmentandgrossdomesticproduct.Themodellingresultsshowthatanambitiousapproachtotheenergytransition–onethatputssocio-economicobjectivesatthecoreofpolicymaking–canyieldsubstantialbenefits,advancingprogresstowardsthegoalofajusttransitionforall.RelativetothePES,theglobaleconomyisprojectedtogrowannuallyonaverageby1.5%underthe1.5°CScenario.Thisdifferenceingrossdomesticproductismostlyattributabletohighertransition-relatedinvestmentandsocial-directedpaymentstolow-incomehouseholdstomakethetransitionmoreinclusive.Underthe1.5˚CScenario,onaverageannualterms,economy-wideemploymentwillbe1.7%higherthanunderthePESbetween2023and2050.By2050,themoreambitioustrajectorywouldyield140millionjobsintheenergysector.About40millionpeoplewouldworkinrenewableenergybythen,whichistwiceasmanyaspredictedunderthePES.WhencomparedtothePES,the1.5˚CScenariowouldcreate38millionmorejobsinothertransition-relatedsectors(i.e.energyefficiencyandotherend-uses,gridsandenergyflexibility,hydrogen,etc.).80VOLUME2CHAPTER4Increasedinternationalcollaborationwillhelpensurerapidaccelerationoftheenergytransitionandimprovewelfaremoreequitably.TheoverallwelfaregainsoverPESarealsosignificant.Thewelfarefindingsemphasisetheneedforpoliciesandsocietalinstitutionsthatdirectresourcestowardsincreasingwell-beingoncesufficiencylevelshavebeenreached.Thetransitionfromfossilfuelstorenewableenergysourcesaffectssocialandenvironmentalwelfaredimensionsprimarilybyloweringpollutionandslowingglobalwarming.Increasedinternationalcollaborationflowshelpredistributewelfaremoreequitablyviasocial-directedpaymentstothebottomquintiles,especiallyinthedevelopingcountries.4.3PoliciestopromotestructuralchangeAcomprehensiveapproachtotheenergytransitionneedstoincludeasetofpoliciestopromotestructuralchangeandenablecountriestotakefulladvantageofsocio-economicopportunitiesthatemergeastheenergytransitionunfolds.Decadesandcenturiesofunequaldevelopmenthavebroughtaboutdifferentpatternsofstrengthsandweaknessesamongdifferentcountriesandregionsoftheworld.Thesetranslateintotechnological,financial,commodityandtradedependenciesandmisalignments.Forexample,unequalexchangebetweentheadvancedanddevelopingeconomiesamountstoanetdrainfromthelesseconomicallyadvancedcountriesofastaggeringUSD11trillionperyear(Hickeletal.,2022).Thereisariskthatstructuraldependenciescouldsimplybereplicatedintheenergytransition.Asitstandsnow,veryfewcountrieshavetheabilitytoproducemorethanalimitedsetofcomponentsforsolarphotovoltaicpanels,windturbines,electricvehicles,batteries,orotherenergytransitiontechnologies.Thislimitsthedegreetowhichtheycangeneratedomesticvalueandcreatelasting,decentjobs.Infact,ifresource-richcountriesthatareeitheremergingordevelopingareunabletopursuegreenindustrialdevelopment,theymayoncemorefindthemselvesrelegatedtotheroleofmerecommodityproducers,whilethebulkofvalueaddedwouldcontinuetoaccrueelsewhere.Changingthesepatterns(throughkeypolicymeasures)isahighlycomplexundertaking,requiringnotonlyastrongvisionofthefuture,clear-eyedleadership,andengagementwithindustries,communitiesandotherstakeholders,butalsoco-ordinatedactiontomarshalhumanskillsandtechnicalcompetencies,establishcompetentanddedicatedinstitutions,pursueregionalorglobalco-operationforcapacity-building,andmobilisepublicandprivatefinancialresources.81WORLDENERGYTRANSITIONSOUTLOOK2023Keypolicymeasuresinclude:•Industrialpolicies.Manycountriesdonotatpresentpossessthecapacitytomanufacturetheequipmentandrelatedservicesneededfortheenergytransitionandthusremainimportdependent.Thebulkofthesocio-economicbenefitstobehadinthiscontextthusaccrueselsewhere,inasmallnumberofexportingcountries.Industrialpolicymakingcanleverageexistingcapabilitiesandfurtherenhancethemsoastoformviabledomesticsupplychainsandenhancelocalvaluecreation.Industrialpolicymeasuresmayincludelocalcontentrequirements;taxcredits,subsidies,grantsandloanguaranteesformanufacturing;publicfundsforresearchanddevelopment;inexpensiveprovisionofelectricityandland;andinfrastructureupgrades.•Skillsassessmentsandeducationandtrainingstrategies.Countriesneedtoundertakedetailedassessmentsofrequiredoccupationalpatternstocreateaskilled,capableenergytransitionworkforce.Thisincludescontinuousco-ordinationbetweentherenewableenergyindustryandtheeducationalsysteminanefforttomatch,asmuchaspossible,industrydemandforskillsandthesupplyofskillsgeneratedbyschools,vocationalcentresanduniversities,thusavoidingskillgaps.Giventhatmillionsofjobsinthefossilfuelsectorwillfallbythewaysideastheenergytransitionaccelerates,particularemphasisneedstobeplacedoneffortstoretrainworkersfromthatsector.Thisentailsnotonlyanassessmentofexistingskillsthatcanbeadjustedandrepurposed,butalsoprogrammestofacilitatethenecessaryre-accreditationofworkers.•Labourmarketmeasures.Theseincludeprogrammestoprovideadequateemploymentservicestoassistpeopleinenteringtheworkforceorfindingnewjobs.Duringthetransition,varioustypesoflabourmarketmisalignmentsmayemerge:temporal(jobcreationandjoblossnottakingplaceatthesametime);spatial(jobcreationnotnecessarilyinthesamelocationasjobloss);sectoral(jobgainsandlossesaffectingdifferentindustries);andeducational(jobcreationandjoblossmarkedbydifferentskillsprofiles).Thus,programmestofacilitatelabourmobilityandothermeasuresmaybeneeded.•Communityinvestmentandrevitalisation.Publicinvestmentscanbetailoredinwaystoenhancetheabilityofcommunitiesandregionstotakeadvantageofenergytransitionopportunities.Suchmeasuresarebestconnectedtoindustrialpolicymaking(e.g.effortstomoderniseorupgradearegion’sinfrastructurecanhelpattractenergytransitioninvestment).Thereisalsoaneedforsocialprotectionprogrammestoassistfossilfuel-dependentworkersandcommunitiestocopewithanytransitionchallenges.Thepoliciessketchedabovewillnotgenerateimmediateresults.Theyrequirethelongview,andalong-termcommitmentofresources,lastingpoliticalsupportandawillingnesstoadjustpoliciesalongthewayandtokeeplearningfromexperiencesaroundtheworld.Withoutdoubt,thisisachallengevis-à-vistheshorttimehorizonofelectoralcyclesandquarterlyorannualcorporatereportingstandards.Changerequiresastrongvisionofthefuture,clear-eyedleadership,andengagementwithindustries,communitiesandotherstakeholders.82VOLUME2CHAPTER44.4MakingtheglobaleconomymoresustainableThemodellingforthisreportshowsthatthe1.5°CScenariocangrowthegrossdomesticproduct,theindicatorthathasbeenthebellwetherofpoliticsandeconomicsaroundtheworldforsomedecades.Butevenasthepoorersegmentsofhumanityhaveamplereasontoseekalargersliceoftheeconomicpieinordertosecureadecentlife,wealthycountriesandcommunitiesthatconsumethemajorityoftheworld’sresourceswillneedtofindwaystomoderatetheirclaims.Theenergytransitionneedstobeembeddedinbroadersystemicchangestoensurealevelofhumanwell-beingatlowerlevelsofenergyandmaterialsintensity,whileovercominghistoricaldisparities.Evermorefrequentclimate-relateddisastersconfirmtheneedtoundertakeanurgent,fundamentaltransformationoftheeconomy,beyondamereswitchfromfossilfuelstorenewableenergy.Sixofnineplanetaryboundarieshavealreadybeencrossed(Richardsonetal.,2023);ceaselesseconomicgrowthisnotpossibleonaplanetwithfiniteresourcesandincreasinglystressedecosystems.Meanwhile,thedominanteconomicmodelfailstobringaboutuniversalwell-being.Itgenerateswidedisparitiesinwealthandhumandevelopmentbetweenandwithincountriesandexposesthedevelopingcountriestotherepercussionsofresourcedepletionandtoincreasingclimatevulnerability.Thereisnowavibrantdiscussionofpost-growthparadigmsthatwouldallowatransitiontowardsmoreinclusiveandsustainableeconomies.Movinginthisdirectionwouldrequirescrutinyoffundamentalproductionandconsumptionpatternsandalsoeffortstodifferentiatebetweenhumanneedsandwants.Thisisnotaneasytaskbutcouldcreatethespaceneededbypeopleconsumingfarlessthanwhatisneededtosustainadecentlife.Hundredsofmillionsofpeoplestillfallshortofthestandardsofhumanwell-beingembodiedintheSustainableDevelopmentGoals.Thetaskcannotbelefttomarketsifajust,inclusiveandmoresustainableworldistobeachieved.Policyprioritiesmustbedeterminedinopendebatethatincludesthecommunitiesmostaffectedbycurrentinequities.Governments,actinginaccordwithstakeholdersfromacrossthespectrumofsocieties,willhavetoplayaproactiveroleintransformingeconomicsystems,reinforcinganargumentthathasunderpinnedIRENA’sstapleofsocio-economicreports:aholisticframeworkconsiderstechnologicalinnovationinconjunctionwithsocial,economicandenvironmentalpriorities.83WORLDENERGYTRANSITIONSOUTLOOK2023REFERENCESBoyce,J.K.(2018),"CarbonPricing:EffectivenessandEquity",EcologicalEconomics,vol.150,pp.52–61,https://doi.org/10.1016/j.ecolecon.2018.03.030Brand,U.,etal.(2021),"Fromplanetarytosocietalboundaries:anargumentforcollectivelydefinedself-limitation",Sustainability:Science,PracticeandPolicy,vol.17/1,https://doi.org/10.1080/15487733.2021.1940754Bringezu,S.(2015),"PossibleTargetCorridorforSustainableUseofGlobalMaterialResources",Resources,vol.4/1,https://doi.org/10.3390/resources4010025Burke,M.,etal.(2015),"Globalnon-lineareffectoftemperatureoneconomicproduction",Nature,vol.527,https://doi.org/10.1038/nature15725Burke,M.,etal.(2018),"LargepotentialreductionineconomicdamagesunderUNmitigationtargets",Nature,vol.557,https://doi.org/10.1038/s41586-018-0071-9Burke,M.,andTanutama,V.(2019),ClimaticConstraintsonAggregateEconomicOutput,Workingpaper,No.25779,NationalBureauofEconomicResearch,www.nber.org/papers/w25779Chancel,L.,etal.(2022),WorldInequalityReport2022,WorldInequalityLab,wir2022.wid.worldClimateEquityReferenceProject(n.d.),"Responsibilityandcapacityindex",https://calculator.climateequityreference.org/Dumoulin,A.(2023),"AbriefsummaryoftheWorldBank’sCarbonPricingReport2023",Inter-AmericanCenterofTaxAdministrations,https://www.ciat.org/a-brief-summary-of-the-world-banks-carbon-pricing-report-2023/?lang=en(accessed13September2023).Ensor,J.,andHoddy,E.(2021),"Securingthesocialfoundation:Arights-basedapproachtoplanetarybound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dClimatePolicyInitiative,AbuDhabi,www.irena.org/Publications/2023/Feb/Global-landscape-of-renewable-energy-finance-2023IRENAandILO(2021),Renewableenergyandjobs:Annualreview2021,InternationalRenewableEnergyAgency,AbuDhabi,www.irena.org/publications/2021/Oct/Renewable-Energy-and-Jobs-Annual-Review-2021(accessed23March2022).85WORLDENERGYTRANSITIONSOUTLOOK2023IRENAandILO(2022),Renewableenergyandjobs:Annualreview2022,InternationalRenewableEnergyAgency,AbuDhabi,www.irena.org/publications/2022/Sep/Renewable-Energy-and-Jobs-Annual-Review-2022(accessed23March2022).IRENAandILO(2023),Renewableenergyandjobs:Annualreview2023,InternationalRenewableEnergyAgencyandInternationalLabourOrganization,AbuDhabi,https://www.irena.org/Publications/2023/Sep/Renewable-energy-and-jobs-Annual-review-2023(accessed23March2022).Millward-Hopkins,J.,etal.(2020),"Providingdecentlivingwithminimumenergy:Aglobalscenario",GlobalEnvironmentalChange,vol.65,pp.102168.Piketty,T.(2020),"Capitalandideology",p.1104,BelknapPressofHarvardUniversityPress.Richardson,K.,etal.(2023),"Earthbeyondsixofnineplanetaryboundaries",ScienceAdvances,vol.9/37,https://doi.org/10.1126/sciadv.adh2458Rockstrom,J.,etal.(2023),"SafeandjustEarthsystemboundaries",Nature,vol.619,https://doi.org/10.1038/s41586-023-06083-8Sanderson,K.(2023),"Earth’saverage2023temperatureisnowlikelytoreach1.5°Cofwarming",Nature,https://doi.org/10.1038/d41586-023-02995-7Santos,C.(2023),"CarbonTaxes:ALargeImpactwithSmallNegativeEconomicEffects",Inter-AmericanDevelopmentBank,https://blogs.iadb.org/ideas-matter/en/carbon-taxes-a-large-impact-with-small-negative-economic-effects/(accessed13September2023).Tirole,J.(2017),EconomicsfortheCommonGood,PrincetonUniversityPressUNFCCC(2016),HISTORYOFTHE0.7%ODATARGET,https://www.oecd.org/dac/financing-sustainable-development/development-finance-standards/ODA-history-of-the-0-7-target.pdfWEF(2014),Matchingskillsandlabourmarketneeds:Buildingsocialpartnershipsforbetterskillsandbetterjobs,GlobalAgendaCouncilonEmployment,WorldEconomicforum,www3.weforum.org/docs/GAC/2014/WEF_GAC_Employment_MatchingSkillsLabourMarket_Report_2014.pdfWorldBank(2023),"RecordHighRevenuesFromGlobalCarbonPricingNear$100Billion",WorldBank,https://www.worldbank.org/en/news/press-release/2023/05/23/record-high-revenues-from-global-carbon-pricing-near-100-billion(accessed13September2023).86VOLUME2APPENDIXAPPENDIXAssumptionsandresultsofwealthtaxsensitivityanalysisInanadditionalsensitivityanalysisunderthe1.5°CScenario,internationalcollaborationisassumedtohavetwosourcesoffunding,describedbelowandillustratedinFigureA1.Thefirstiscountrycontributions,calculatedusingtheResponsibilityCapacityIndex(ClimateEquityReferenceProject,n.d.)–thatis,inproportiontocountries’rolesinproducingtheclimatecrisis,andtheirnationalwealth.Thesecondisrevenuesfromwealthtaxation,asourceoffundingnotconsideredinpreviouseditionsoftheWorldEnergyTransitionsOutlook(IRENA,2022a).DerivedfromoneofthescenariosoftheWorldInequalityReport(Chanceletal.,2022),thewealthtaxschemegeneratesrevenuesforincreasedsocialexpenditureandinvestment.TableA1showsthetaxrateassumedforeachwealthgroup.FIGUREA1Internationalcollaborationfunding:ContributionsanddistributionINDIVIDUALSGOVERNMENTSWealthtaxCountriescontributionsasperRCIInclusivedevelopmentInternationaljusticeInternationalequityINTERNATIONALFINANCIALCOLLABORATIONFLOWSFinancingpolicy-relatedinvestmentandsocialspendingNote:GDP=grossdomesticproduct;RCI=ResponsibilityCapacityIndex.87WORLDENERGYTRANSITIONSOUTLOOK2023TABLEA1WealthtaxassumptionsTaxrate(%)perwealthbracketWealthgroup(in2021USD)1%1million–10million1.5%10million–100million2%100million–1billion1billion–10billion2.5%10billion–100billion3%Over100billion3.5%Source:(Chanceletal.,2022).TherevenuesgeneratedbytheadditionalwealthtaxationwouldprovideanannualaverageofaroundUSD1trillionbetween2023and2050,equivalenttoaround0.7%ofglobalGDPinthesameperiod.Toputthisnumberinperspective,wealthtaxrevenuesrepresentanaverageofaround0.08%oftotalwealthand0.09%offifthquintilewealthoverthe2023-2050period.ThiswouldequatetoanannualcontributionofaroundUSD15000fromeachofthe62millionpeoplelistedin2021ashavingwealthofmorethanamilliondollars.2323Atmarketexchangerates(Chanceletal.,2022).88VOLUME2APPENDIXCombiningbothsourcesofrevenue,thetotalmonetaryflowofinternationalcollaborationamountstoapproximatelyUSD2trillion24peryear(FigureA2),withhalfcomingfromgovernmentcontributionsandtheotherhalffromwealthtaxation.Theincreasedamountisusedinthesensitivityanalysistobridgethewelfaregapsinthedevelopingcountries,predominantlyinthesocialanddistributionaldimensions.Toaddressthesegaps,therevenuesfromthewealthtaxaredividedasfollows:•80%isallocatedtoadditionalsocialspending.•20%isdirectedtowardsimprovinggovernmentfiscalbalances,whichareassumedtoeventuallycontributetosocial-directedpayments.FIGUREA2ContributionstotheGlobalEnergyTransitionFundfrompublicsectorandwealthtaxationCountriescontributionasperRCI0.7%ofglobalGDP1USDNote:GDP=grossdomesticproduct;trillionRCI=ResponsibilityCapacityIndex.1USD89trillionWEALTHTAXContributionsasperChanceletal24In2021USD.WORLDENERGYTRANSITIONSOUTLOOK2023GDPresultsBetween2023and2050,andcomparedtothe1.5°CScenario,theintroductionofwealthtaxationinthe1.5˚CScenariowouldseeanincreaseintheannualaverageinGDPoverthePESfrom1.5%to2.6%(FigureA3).Publicinvestmentisstillthemostinfluentialdriverthroughoutthetransitionperiod(i.e.2023-2050).Underthewealthtaxationsensitivity,afractionofthewealthtaxationrevenuesflowsdirectlyintogovernmentfiscalbalances,increasingsocial-directedpaymentsforthebottomquintiles,directlyaddressingtheincomedistributiondimensionandindirectlytheeconomicdimension(consumptionandinvestment).Underthewealthtaxsensitivity,theglobalanalysisalsoshowslargespatialdisparities,asinthe1.5˚°CScenario,withthesametrendinGDPdifferences.Therevenuesfromwealthtaxationwouldaddressthesocial,distributionalandeconomicdimensionsinmostofdevelopingeconomies.FIGUREA3GlobalGDPaveragepercentagedifferencebetweenthePESand1.5°CScenariosensitivity,2023-2050GDPdierencewithPES(%)3.02.6%1.52.52.01.5%1.01.00.9%0.51.50.500.4%1.0-0.500.5-0.50-0.51.5°C1.5°CWT20502050ChangeinGDPOtherindirectandinducedeectsInduced:social-directedpaymentsPublicinvestmentandspendingInduced:aggregatepricesPrivateinvestmentInducedandindirect:otherTradeNote:GDP=grossdomesticproduct;PES=PlannedEnergyScenario;1.5˚C=1.5˚CScenario;1.5˚CWT=1.5˚CScenariowithwealthtaxsensitivity.90VOLUME2APPENDIXEmploymentTheeconomy-wideemploymentcreationoverthePESwouldbehigherunderthewealthtaxationsensitivitycasethaninthe1.5°CScenario.Itwouldbe3.0%higheroverthe2023-2050period(A4).Employmentcreationwouldincreaseovertheentiretransitionperiodunderthesensitivity,strengthenedbytheimplementationofthewealthtax.Asinthe1.5°CScenario,investmentandotherindirectandinducedfactorswouldalsodriveeconomy-wideemploymentvariationsinthewealthtaxationsensitivity,buttradewouldhaveaminimalimpact(FigureA4).Intheseconddecade(2031-2040),comparedtothePES,consumerspendingisexpectedtocreatearound22millionjobsinthe1.5°CScenarioby2050,afigurethatwouldmorethandoubleto45millionunderthewealthtaxationsensitivity.FIGUREA4Globaleconomy-wideemployment,averagepercentagedifferencebetweenthePESand1.5°CScenariosensitivity,bydriver,2023-2050EmploymentdierencewithPES(%)3.53.0%3.0Changeinemployment2.5Otherindirectand2.01.7%inducedeectsTrade1.5Publicinvestmentandspending1.0Privateinvestment0.501.5°C1.5°CWTNote:GDP=grossdomesticproduct;PES=PlannedEnergyScenario;1.5˚C=1.5˚CScenario;1.5˚CWT=1.5˚CScenariowithwealthtaxsensitivity.91WORLDENERGYTRANSITIONSOUTLOOK2023Underthewealthtaxationsensitivityanalysis,wecanexpectjobcreationtorisefrom19milliontoaround81millionby2050.Theimpactofwealthtaxationonemploymentcreationisexpectedtobegreaterinkeyregionsofthedevelopingeconomies(notablyAfrica)thanintheG20countries(FigureA5).Thereason,ofcourse,isthatthoseregionswouldbetherecipientofincreasedinternationalaidflowsfarinexcessoftheircontributiontothem.FIGUREA5Averagepercentagedifferenceineconomy-wideemploymentinselectedregionsbetweenthePESand1.5°CScenariosensitivity,bydriver,2023-2050EmploymentdierencewithPES(%)108.4%8643.0%3.1%21.7%1.6%1.8%1.3%2.0%0.1%0.9%0.2%0.2%0-21.5°C1.5°CWT1.5°C1.5°CWT1.5°C1.5°CWT1.5°C1.5°CWT1.5°C1.5°CWT1.5°C1.5°CWTGlobalAfricaG20NetoilexporterNorthAfricaNorthAmericaChangeinemploymentOtherindirectandinducedeectsPublicinvestmentandspendingTradePrivateinvestmentNote:G20=GroupofTwenty;PES=PlannedEnergyScenario;1.5˚C=1.5˚CScenario;WT=1.5˚CScenariowithwealthtaxsensitivity;netoilexporter=Denmark,Norway,Canada,RussianFederation,Mexico,Brazil,Argentina,Colombia,SaudiArabia,Nigeria,MalaysiaandKazakhstan.92VOLUME2APPENDIXWelfareFigureA6presentstheresultsofawealthtaxincombinationwiththe1.5°CScenarioontheoverallwelfareindexforAfrica,theEU27andtheworld.Thesocialanddistributionaldimensionsboostsignificantlytheimprovementsalreadyobservedunderthe1.5°CScenario.Overall,theimprovementstogeneralwelfare–again,relativetothePES–aresignificant.InAfrica,theimprovementunderthe1.5°CScenariois21%andrisesto37%underthe1.5°Cwealthtaxationsensitivity–agoodindicationoftheefficacyofthescenarios’policymeasures.FIGUREA6Impactofintroducingawealthtaxinthe1.5°CScenarioonthewelfareindexattheglobalandregionallevelsby2050:Global,AfricaandEU27DierenceinWelfareIndexwithPES(%)40EnvironmentalEconomic30AccessSocialDistributional201001.5°C1.5°CWT1.5°C1.5°CWT1.5°C1.5°CWTGlobalAfricaEU27Note:PES=PlannedEnergyScenario;WT=WealthTax;1.5˚C=1.5˚CScenario;1.5˚CWT=1.5˚CScenariowithwealthtaxsensitivity;EU=EuropeanUnion.93www.irena.org
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