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We study the impact of climate change mitigation policies intended to reach the Paris Agreement's two-degree target on the structure of European labour markets. Employing a three-sector macro-econometric model with a rich labour market extension, we show that the measures targeted at shrinking the use of fossil fuels in electricity generation and the road transport sector – both of which have an overall modest, positive impact on GDP and total employment – could make occupational structure less unequal and polarised in 2030, the target deadline. This could occur in more than half of the European Union's member states, particularly where the industries most affected by the transition to a low-carbon economy (i.e., mining and quarrying, utilities and manufacturing of coke and refined petroleum products) remain most important. • Impact of climate change mitigation policies on the structure of European Labour markets. • Analysis of the effect on inequality and polarisation through the lens of a macro-econometric model and wage rankings. • Overall, European labour markets become slightly less unequal and polarised as a result of the green transition. • Relevant different across countries, with greater reductions in inequality and polarisation in those countries where the industries most affected by the ecological transition remain most important. [ABSTRACT FROM AUTHOR]

The European Green Deal aims to put the EU on track towards climate neutrality by 2050. One of the key elements is a more stringent greenhouse gas emission reduction target of 55% below 1990 levels by 2030. We analyse the socio-economic consequences of alternative policy pathways to reach that target, either relying more on regulatory standards, on carbon pricing, or a mix of both. We develop a modelling framework that captures macro-economic and sectoral impacts and closely aligns economic and energy system modelling. We further decompose aggregate labour market outcomes into skill and occupation types, and downscale representative household results to micro-level household data to evaluate the distributional effects across income groups with heterogeneous expenditure patterns. By combining models and datasets, our framework enables incorporating a high degree of technological detail while revealing socio-economic aspects of the transition that may go unnoticed in coarse, aggregate assessments. In particular, our results highlight the heterogeneous impacts of climate policy across sectors, worker skill types and income groups, which may require particular attention in climate policy design and corresponding complementary measures to ensure a fair transition to a low-carbon economy. • We assess different policy packages to achieve stricter EU 2030 climate targets. • A framework for climate policy assessment needs to be both broad and detailed. • We develop such a framework by linking energy models with economic models and data. • We downscale aggregate results for labour markets and household consumption. • Results illustrate model uncertainty and policy design potential to alter outcomes. [ABSTRACT FROM AUTHOR]