Macro-financial risks, income distribution and socio-ecological transition in climate-energy models

Growing attention from academia and institutions has been devoted to understanding how to achieve a ‘just’ socio-ecological transition towards a lower-carbon economy. This paper reviews the economic modelling literature on the ‘green’ energy transition, with a particular focus on the macro-financial transitional risks and their implications on income distribution. We apply a meta-model aiming to identify specific peculiarities and the current state-of-the-art of non-equilibrium economic modelling. The study analyses drivers, transmission channels and impacts of low-carbon structural change on macroeconomic and distributive outcomes. The ultimate goal is to provide insights into the complexity of the transition, offering an in-depth analysis that underscores the central role of policy intervention in solving social and environmental dilemmas. We draw two main conclusions: from a methodological standpoint energy-related analysis is increasingly integrated into macro models, while in terms of policy implications, the possible drawbacks of such a shift in the energy transition can only be addressed by resorting to coordinated monetary, fiscal, and industrial policies in achieving an equitable decarbonisation, within a context of a narrowing window for climate action and growing disengagement from the world’s governments.