A new study published in Environmental Research Communications reveals four lessons for regional policymakers. Dr Matt Lyons examines the balance between environmental and economic impacts of net zero when pursued by a demand management approach.
In the article an environmentally extended input-output model for the UK is used (UKEIM). A series of scenarios are developed reducing demand for high-emissions sectors within the UK economy and comparing the impacts on output, employment, CO2 and Greenhouse Gas emissions.
“For the UK to achieve the lowest boundary estimates of net zero CO₂ emissions by a focus on high emissions sectors (Agriculture, Energy and Transport) demand would need to reduce by 50%.” Dr Matt Lyons.
Key findings
- Net zero requires a 50% demand reduction across high emissions sectors – A 50% reduction in demand across high emissions sectors would reduce annual CO2 emissions by over 87,000kt exceeding some estimates of net zero targets for the UK. The economic impact of this would be -2.89% of economic output. Technological change that reduces emissions intensities is critical to reducing emissions whilst reducing the economic harms.
- Air travel has disproportionate impacts – Air travel is the single most environmentally impactful sector. A negative demand adjustment in this sector has a significant impact on emissions but a relatively minor economic impact. The model suggests a 50% fall in final demand for the air transport sector would result in a fall of Co2 emissions of -44,880kts equivalent to 59% of the emissions reductions required for the UK to reach net zero. While the impact on the economy in terms of output would be -0.41%.
- Sustainable Aviation Fuel has potential but timing is key – Projections of the potential impact of sustainable aviation fuel suggest major improvements in the emissions profile of the aviation sector. If a lower bound estimate (-35%) for the impact of SAF on CO2 emissions intensities is realised the impact would be equivalent to a 50% fall in demand for the sector at current intensities. The impact would be -40,000kts of CO2 or over halfway towards UK’s net zero target alone. However, there is reasonable concern that the technology will not arrive in time to mitigate the worst impacts of climate change.
Meet the Author
Dr Matt Lyons
Matthew Lyons specialises in regional economic modelling, with particular expertise in econometric multi-regional input-output (MRIO) analysis. His research focuses on the spatial dimension of economic transformation, including the role of creative industries and innovation, the impacts of climate change and the transition to net zero. He leads the team’s economic modelling portfolio and serves as the environment theme lead on the Local Policy Innovation Partnership (LPIP) Hub project.
Matt joined the City-REDI team in 2021 as a Research Fellow. He holds a PhD and MSc from Cardiff University and a BSc from the University of Plymouth. In 2024 he was elected Secretary of the Regional Science Association International – British and Irish section (RSAI-BIS) and is a member of the International Input Output Association (IIOA). He has led research projects in collaboration with external partners including the BBC, Nesta’s Creative Policy and Evidence Centre and the West Midlands Combined Authority. His work has been featured in The Independent, The Observer, BBC News, ITV News, and CTV News Calgary.