Urgently needed carbon emissions reductions might lead to strict command-and-control decarbonization strategies with potentially negative economic consequences.

Analysing the entire firm-level production network of a European economy, we have explored how the worst outcomes of such approaches can be avoided.

We compared the systemic relevance of every firm in Hungary with its annual CO₂ emissions to identify optimal emission-reducing strategies with a minimum of additional unemployment and economic losses. Setting specific reduction targets, we studied various decarbonization scenarios and quantified their economic consequences.

We determined that for an emissions reduction of 20%, the most effective strategy leads to losses of about 2% of jobs and 2% of economic output. In contrast, a naive scenario targeting the largest emitters first results in 28% job losses and 33% output reduction for the same target.

This demonstrates that it is possible to use firm-level production networks to design highly effective decarbonization strategies that practically preserve employment and economic output.

J. Stangl, A. Borsos, C. Diem. T. Reisch, S. Thurner, Firm-level supply chains to minimize unemployment and economic losses in rapid decarbonization scenarios, Nature Sustainability (2024).