The industrial sector contributes about 25% of global carbon dioxide emissions, but there has not been enough study on how decarbonization efforts to reach net-zero goals set by the Paris Agreement impact the broader economy. This scarcity of empirical studies could hinder efforts to lower greenhouse gas emissions, Yale School of the Environment economists argue in a paper recently published in Science .
"There is vast space for broad-scale work on industrial decarbonization that can leverage research partnerships and new data sources. Quantifying impacts on decarbonizing energy-intensive industries can inform policy makers and the public on different approaches, trade-offs, and spillovers to the macroeconomy," said Kenneth Gillingham , the Grinstein Class of 1954 Professor of Environmental and Energy Economics, a lead author of the paper.
The authors call for opening new lines of research on how industrial decarbonization technologies and policies interact with the broader economy and how using real-world data can help measure impacts. They cite several suggestions for further study, including the spillover effects of decarbonization on jobs, wages, trade, and incentives.
"We really need to know how supply chains are going to be affected. Where are prices going to be changing? Where are people gaining jobs and where are people losing jobs? How can all this be quantified?" Gillingham said
Citing specific examples, the authors noted that additional inquiry would be useful to analyze what happens when upstream subsidies offered by governments for factories using clean hydrogen production are not adapted by downstream industries such as shipping because it is not cost effective for them to switch to clean hydrogen. While clean energy firms can provide high-paying and stable jobs, opportunities to transition to these jobs historically have been limited to individuals in fossil fuel industry and additional research on the effects on careers and wages for those who aren't able to move to clean energy jobs is also needed. In another example of impacts that need to be examined, the authors pointed to environmental regulations that can shift production of polluting goods to less-regulated countries.
"When the public, policymakers, or researchers hear the words 'industrial decarbonization,' the first instinct is often to see it as a narrow, technical topic — an issue for those living near a smokestack, a matter for regulators, or a specialized field of study. However, industrial decarbonization is an emerging frontier that affects everyone," said Aleh Tsyvinski, the Arthur M. Okun Professor of Economics at Yale and a study co-author.
Recent initiatives, such as the Inflation Reduction Act, the European Green Deal Industrial Plan, and China's 1+N Policy Framework, provide opportunities for foundational research quantifying the impacts of the policies, the authors note. Yet, research in the field can be difficult for several reasons, including acquiring data on production networks that are often tightly guarded because of market competition. However, there has been progress in recent years in obtaining such data, Gillingham noted. Financial regulations which typically require companies to publicly disclose their Scope 1, 2 and sometimes Scope 3 greenhouse gas emissions along with climate-related financial risks and mitigation strategies are helping researchers build better networks to consolidate and extend existing data sources. The authors also pointed to the unique opportunities governments and international organizations have to better facilitate data collection and resource collaboration.
"Whether real-world policy impacts and technology dynamics play out as envisioned at the broad scale across the economy thus remains one of the most pressing open research questions in the field," the authors stated. "Cross-cutting research partnerships and data sharing could vastly improve our understanding of and inform the critical new frontiers in industrial decarbonization that cover a broad economic context."
Gillingham said that the paper grew out of a 2023 workshop at the National Bureau of Economic Research that brought together economists, engineers, and social scientists for discussions on decarbonization efforts in hard-to-abate sectors. The initial gathering, organized by Gillingham and Lint Barrage '13 PhD, an associate professor at ETH Zürich, led to a follow-up conference and a multidisciplinary agreement among scientists on the need for new research that can help inform policy initiatives on decarbonization.
"The economy can remain stuck with high emissions even if it has conventional climate policies in place, highlighting the need to consider cross-industry spillovers," said Barrage, a co-author of the paper.
