Application of the Concept of "Functionalities" in Macroeconomic Modelling Frameworks – Insights for Austria and Methodological
Lessons Learned. EconTrans Working Paper #4
WIFO Working Papers, 2021, (636), 93 pages
Commissioned by: Klima- und Energiefonds
Study by: Austrian Institute of Economic Research – International Institute for Applied Systems Analysis – University of Graz, Wegener Center for Climate and Global Change
In order to meet the climate targets as set out in the Paris agreement – i.e., to stay "well below 2 °C" of global warming
– a transformation of the socio-economic system towards climate neutrality is required. This transformation is connected to
radical changes in most aspects of our daily lives, especially with respect to mobility and housing. This poses the questions
of how well-being might change due to these changes and ultimately how to quantitatively measure such changes. In the present
paper we make a first steps towards answering these fundamental questions. We do so by making use of the concept of energy
services, or "functionalities", which take a demand and sufficiency perspective. To quantify effects, we operationalise this
concept by using and extending existing macroeconomic models (Input-Output and Computable General Equilibrium). In terms of
results we provide standard economic indicators but contrast them with – in our view – more relevant indicators, such as a
more comprehensive measure for well-being, as well as distributional effects and co-benefits. Our results clearly show increases
in well-being emerging from the climate neutral transformation, whereas conventional indicators such as GDP are declining.
We thus demonstrate the importance of looking at the "right" indicators, when assessing socio-economic effects of climate
policy and at the same time provide a concrete alternative to state-of-the-art modelling approaches.
Keywords:TP_GrueneTransformation
Research group:Climate, Environmental and Resource Economics