Energy price shocks and stabilization policies in the MATRIX model

Beyond Green Preferences: Alternative Pathways to Net-Zero Emissions in the MATRIX Model

“…In this study, we investigate the impact of GPs on the transition towards a NZE economy and compare it with different climate policies. To accomplish this, we enhance the integrated assessment MATRIX model (Ciola et al, 2023;Turco et al, 2023;Bazzana et al, 2023) by modifying consumers' preference structure to incorporate goods' implicit emissions. Further, we extend this pro-environmental behavior to firms in the model.…”

“…The MATRIX model (Multi-Agent model for Transition Risks) is a multi-sector, multi-agent, integrated-assessment macroeconomic model designed to analyze the effects of energy and environmental policies on the climate and economic dynamics (Ciola et al, 2023;Turco et al, 2023;Bazzana et al, 2023). The model encompasses a diverse set of heterogeneous agents belonging to different sectors, such as households, corporates, banks, and public entities, interacting in decentralized markets.…”

“…In this paper, we extend the climate version of the model calibrated on the United States (US) economy (Ciola et al, 2023) to explore the role of both demand-driven green preferences and supply-side environmental policies in achieving the goal of net-zero emissions. The following section introduces the novel features incorporated into this new variant of the model, while the interested reader may refer to Ciola et al (2023), Turco et al (2023), andBazzana et al (2023) for an exhaustive description of the remaining parts.…”

“…Our work contributes to this strand of the literature by providing new theoretical evidence on the macroeconomic effects of a switch in the preferences of economic agents toward less polluting goods and compares against climate policy scenarios. In particular, we extend the climate version of the Multi-Agent model for Transition Risks (MATRIX) (Ciola et al, 2023;Turco et al, 2023;Bazzana et al, 2023) by including a preference structure for consumers that weighs produced goods by their implicit emissions content. At the same time, we introduce an endogenous learning process for firms to model their emissions reduction choice.…”

“…As inCiola et al (2023) andTurco et al (2023), to preserve the stock-flow consistency of the model, we assume that the fossil rents are redistributed within the economy, partly to energy firms (to account for domestic fossil fuel production), and partly to households in proportion to their wealth. A similar procedure applies to abatement costs (seeBazzana et al, 2023).…”