Green preferences are often regarded as crucial factors in facilitating the energy transition. However, it is unclear if they can alone propel an economy towards achieving a net-zero emissions outcome. In this study, we expand the multi-agent integrated assessment model MATRIX by incorporating considerations on implicit emissions in the decision-making process of consumers and firms. To evaluate the efficacy of those green preferences, we construct a range of experiments encompassing varying degrees of pro-environmental attitudes. Those scenarios are then compared to more conventional incentive-based climate policies, such as a carbon tax and a Cap-and-Trade mechanism, with and without a subsidy for abatement technology, each implemented at different stringency. Our findings indicate that only exceptionally high and unrealistic values of green preferences for both firms and consumers can achieve a net-zero outcome in the absence of an active policy. Moreover, the most favorable scenario in terms of environmental, economic and distributional outcomes emerges from a carbon tax accompanied by a moderate subsidy. Without subsidy, policies entail mainly negative economic and distributional consequences as firms transfer the increased costs to consumers.


Suggested Citation: M. Rizzati, E. Ciola, E. Turco, D. Bazzana, S. Vergalli, ‘Beyond Green Preferences: Alternative Pathways to Net-Zero Emissions in the MATRIX model’, Nota di Lavoro 03.2024, Milano, Italia: Fondazione Eni Enrico Mattei