Modelling the macroeconomic implications of a ‘closing the green finance gap’ policy scenario within a low-carbon energy transition

Reaching the UK net-zero emissions target translates into substantial investment requirements into low-carbon energy infrastructure. However, investors are currently not investing sufficiently in renewable energy capacity, leading to the so-called green finance gap. Current energy-economy models generally do not reveal the macroeconomic implications of policies aimed at scaling-up green finance for energy transitions. In the light of this background, we extend the energy-economy Green Investment Barrier Model with the insights from a systematic literature review to investigate the macroeconomic implications of a policy scenario designed to close the green finance gap in combination with and without a scenario to decarbonise the power sector. We also compare the achieved results with studies focusing on a similar research question. We find that the closing the green finance gap policy scenario alongside a low-carbon power scenario leads to the co-benefits of lower power system costs and unemployment, and increases in GDP.