The Economic Case for Decarbonising Slovenia
Europe is on a mission to decarbonise — starting with cities and communities by 2030. With a new and more ambitious approach, Slovenia could be at the forefront of this opportunity and harnessing the benefits that come with it.
In this article, we share highlights from analysis undertaken by Material Economics that show that the economic returns from decarbonising Slovenia would be immense and there are significant upsides to accelerating action before 2030.
This first stage of analysis will already help changemakers and policymakers to plan for much more transformative climate action pathways for communities in Slovenia.
Background
The Thriving Communities initiative helps ambitious communities to create and manage radical enough change to thrive in the 21st century.
One critical enabler of radical change will be communities investing financial capital at a much greater speed and scale than they have managed before, and in ways that much better distribute the returns.
So, a key part of our work is to help communities create Transformative Investment models, as described in this article. As part of this, it is essential to develop an economic case for the change a community wants to achieve. Analysis of the total societal case for transformative change allows us to better see and communicate the scale of total investment needed and economic value of these investments. Here, we have focussed on the economic case for a mission of climate-neutrality by 2030 in Slovenia.
A mission-led approach forces us beyond incremental change. It makes us focus on what must be done in our communities — rather than limiting to presumptions about what can be done. This is also the key frame for the economic case, focussing on holistic analysis of the economic value to be harnessed by achieving a mission.
We felt that an investigation into the economic case for decarbonisation at a national scale would initially be of most value in Slovenia. Firstly, because in a small country many actions in key areas such as transport and power generation need to be tackled in an integrated way, and also because it will provide a frame of reference for all Slovenian communities. In aligned work, Material Economics have gone more deeply into specific local cases for cities across Europe, which would be a good next step for cities and communities that are committed to being at the forefront of climate action in Slovenia — such as Maribor, where we are already working towards the mission to become one of the best places in Europe to live, work and visit by 2025, and climate neutral by 2030.
Scope of Analysis
In this analysis we targeted a net-zero pathway for Slovenia by modelling an action scenario covering the following areas:
- Transportation: electrification of passenger cars, buses, and local freight; reduced passenger transport demand and increased car pooling; mode shifts to public and non-motorised transport; and optimised logistics.
- Buildings and heating: highly energy efficient new buildings; building envelope, lighting and appliance retrofitting; replacement of wood burning and fossil fuels in local heating; replacing fossil fuels in district heating
- Electricity: utility scale solar and wind generation; and rooftop solar installations
- Waste: increased waste sorting and recycling; increased centralised incineration with energy recovery
The diagram above shows that the modelled sectors cover a little more than half of Slovenia’s total 2018 emissions. So, this scenario can’t yet get us all the way to the climate-neutral but it would be a meaningful start. We also aren’t saying this is the best or perfect action scenario — it is intended to be plausible and illustrative, while there would certainly be value in further analysing other scenarios.
The Case for Action is Great
The diagram below shows that the modelled actions result in significant reductions in both health and energy costs — alongside a 76% reduction of in-scope carbon emissions from 2018 levels (43% of total emissions). Health benefits are primarily derived from cleaner air, which obviously also has other quality-of-life benefits that are not yet quantified here.
In Euro terms, the figure below shows that the investment needed to achieve these savings comes to €9.6 Billion by 2030, with an upside of almost 300% on this investment by 2050!
Who would argue with that? Radical climate action in Slovenia isn’t a cost — it would be a significant investment with excellent returns.
On top of these returns, climate action would be a powerful jobs generator — so critical for the next phase of recovery from the covid-19 pandemic. Our estimate, shown in the diagram to the left, is that over 100,000 person-years of employment would be created, especially in the building renovation area. That is more than 10.000 new full-time jobs for 10 years if we started tomorrow.
Strong returns on investment, significant job creation, cleaner air and better health? Based on these figures, radical climate action in Slovenia looks like an obvious choice.
Not so simple?
Slovenia’s Fourth Biennial Report to the UNFCCC in 2020 included scenarios that would generate 1–30% reductions in Slovenia’s greenhouse gas emissions by 2030 in the sectors we modelled. Much less than our scenario. Why would this be, if the case for going further and faster is so good?
Firstly, it is important to take a broad view of benefits to the community created through climate action, including areas such as citizen health, job creation and liveability. As shown above, the aggregate case with energy savings alone isn’t bad, but it is much better when health benefits are included. Maybe this has been underestimated in Slovenia so far.
Then, when we arrange the analysis by action areas, we see that many actions are economic with only energy savings, but many are not. Only by adding health benefits do most actions move into the economic side (below the line in the graphs below). This is especially true in the critical building retrofit area where we know there is great complexity to really deliver at scale, and the job creation potential is highest. This is a challenge, as while health benefits can be quantified in financial terms, they largely are not monetised in the workings of the economy today.
The charts above also show that renewable power generation is critical for climate action in Slovenia, but doesn’t have amazing returns. It makes great sense from a holistic view of climate action and benefits to Slovenian society, but will probably languish if simply left to private market forces. Remember that a mission-led approach demands that we find ways to get all of these actions done, and more, not just the ‘easy wins.’
Furthermore, the graph below shows how the costs and benefits of climate action do not accrue evenly across different actors in the community. This is a key reason why so much needed action is not happening, and won’t happen naturally. For example, again in the critical buildings sector, property owners won’t see financial returns to meet their investments in the current system. New economic tools will be needed to close the loop with the value that citizens and the healthcare system see as a result of building performance improvements.
These insights shows that we must work carefully to develop new economic structures, programmes, policies and business models that will solve the value-cost disconnects in our communities if we are to deliver the actions needed and harness the aggregate value that is on offer. This is all possible, but is generally beyond the scope and means of incremental projects targeting specific technologies or interventions. A much more systemic approach will be needed.
Conclusion
This initial economic case analysis for more radical decarbonisation in Slovenia shows that:
- If Slovenia’s national climate ambitions remain so mild then the people of Slovenia will miss out on immense potential value — in our analysis an almost 300% return on €10 billion of investment to reduce Slovenia’s emissions by over 40% by 2030.
- With potential to create more than 10.000 jobs over the next decade— ambitious climate-action can play an essential role in Slovenia’s economic recovery from the covid-19 pandemic.
- While the aggregate value is there to be had, business-as-usual won’t deliver it. A new strategic approach will be essential to cover the breadth of action needed, capture the full suite of associated returns, and solve disconnects between who benefits and who is currently expected to invest.
- There are many areas where urban and regional communities can take significant leadership and make real progress immediately, while there will also be advantages to strategic approaches at a national scale for some sectors. National investment mechanisms are also likely to be a sensible development, especially leveraging the next phase of EU funds for climate action and covid-19 recovery.
- Extending this analysis would be beneficial — expanding and testing other action scenarios towards achieving full climate-neutrality. These could be advanced at both the national scale, as well as for specific city or regional communities.
We believe that this economic case analysis provides communities in Slovenia with invaluable insights to help guide development of a strategic approach to their 2030 climate-neutrality mission.
While the analysis presented here provides specifics for Slovenia, we also believe that the general dynamics will be similar for other countries in SE Europe and so the analysis will also provide a helpful starting point for others.
Thriving Communities is ready to collaborate with you and your community to turn this potential into radical action now.
If you:
- Would like a copy of the full Economic Case for Decarbonisation in Slovenia report
- Are interested to explore how we can work together to deliver on this potential
Please contact Tim Taylor: tim@korimako.org
Thanks very much to Kasper Thim and Robert Westerdahl from Material Economics, the Maribor team, and eZavod for co-creation and delivery of this work, which was made possible thanks to support from EIT Climate-KIC.
