Climate policies can be implemented with minimal economic damage

The climate policies They can be applied with minimal economic damage if you take into account not only the emissions data, but also the role that each company plays in a country’s economy.

Research signed by the Austrian organization Complexity Science Hub (CSH) and published by Nature Sustainability applies its model with data from Hungary and concludes that reducing a twenty% CO2 emissions would mean only 2% of economic loss.

“The transformation of the economy towards climate neutrality always implies a certain economic tension: some industries and jobs disappear, while others are created,” recalls Johannes Stangl of the CSH and one of the authors, in a statement.

“To understand how climate policy measures will affect a country’s economy, it is not enough to have data on carbon dioxide emissions, we must also understand the role that companies play in the economy,” he said.signed Stangl.

The researchers used a data set from Hungary that includes almost 250,000 companies and more than one million supplier relationships, virtually representing the entire Hungarian economy.

They examined what a country’s entire economy would look like if certain companies were forced to stop production under several scenarios, all aimed at reducing greenhouse gas emissions by a certain amount. twenty%.

In the first scenario they analyzed what would happen if only reducing CO2 emissions were taken into account by a twenty% and the result was that the seven largest emitters in the country would have to cease operations, losing a 32% of economic production, which would not be viable.

However, the researchers propose a two-step approach, based on two crucial factors: a company’s CO2 emissions and what systemic risks are associated with it, that is, what role it plays in the supply network, explains Stangl.

CSH researchers had already developed an Economic Systemic Risk Index (IRSS), which calculates the economic loss that would occur if a company stopped producing.

Taking into account a company’s greenhouse gas emissions and its risk index to the country’s economy, the researchers calculated a new ranking of high-emitting companies in relation to their economic impact.

According to the new classification, a reduction of one twenty% of CO2 emissions would require the cessation of activity of the first 23 companies on the list. However, this would only mean a loss of one 2% of jobs and a 2% of economic production.

The study shows “Clearly we must take into account the supply network at the company level if we want to evaluate what a given climate policy will achieve,” the authors state.

This is – they emphasize – the only way to evaluate which companies will be affected by a specific measure and how it will affect their business partners.

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