Macro-financial transition risks during deep mitigation pathways: evidence from a hybrid agent-based integrated assessment model
Work in progress. Submitted to Nature Climate Change
This paper integrates a process-based integrated assessment model into a macroeconomic agent-based model to shed light on the macroeconomic and financial response to deep mitigation trajectories controlled by carbon pricing. Our results reveal that rapid transitions induced by high-growing carbon prices significantly impact unemployment, inflation, and income distribution. Stabilization policies can mitigate economic fluctuations, though not completely in 1.5°C scenarios. Our paper emphasizes the need for coordinating climate and macroeconomic policy during ambitious decarbonization.