The world faces a series of unprecedented and intertwined crises that pose serious challenges to the stability of economies and societies. Individually, fossil fuel price shocks, climate change, biodiversity loss and socio-economic inequality are all serious issues; but the interactions between them amplify their effects. It is becoming increasingly urgent to accelerate the transition to a more sustainable global energy sector and economy. To date, policymakers have concentrated on the technological, institutional, regulatory and policy facets of the energy transition, with limited attention to its socio-economic implications. This report contends that current transition narratives may not resonate with all stakeholders, largely due to their omission of central socio-economic dimensions. Bridging gaps in climate policy ambition and fostering essential structural changes necessitates unparallel global collaboration.

This report discusses the socio-economic impacts of IRENA’s Paris Agreement-compliant 1.5^°C Scenario, compared to the Planned Energy Scenario (PES), using the scenario roadmaps from Volume 1. This new volume is based on IRENA’s macro-econometric modelling work and provides policymakers with insights into how economic activity, employment and wellbeing may be affected under the 1.5^°C pathway, compared to current policy settings. A key aspect of this report is its comprehensive approach, which includes a set of supportive policies within the 1.5°C pathway designed to facilitate structural changes and empower countries to fully leverage the socio-economic opportunities that arise during the energy transition.

Under the 1.5^°C Scenario, between 2023 and 2050, the world could see an average annual increase in GDP of 1.5% over the Planned Energy Scenario. Public investment, supported by private investment, plays a key role in driving the economy growth. Employment in the renewable energy sector is expected to triple from 2021 levels under the 1.5^°C Scenario, reaching around 40 million jobs worldwide by 2050.

This volume also employs IRENA’s welfare index, composed of five dimensions (economic, social, environmental, distributional and access), to delve deeper into the socio-economic analysis of the energy transition. Human welfare improves in all countries and regions under the 1.5^°C Scenario. The energy transition, nonetheless, needs to be embedded in broader systemic changes to ensure a level of human well-being at lower levels of energy and material intensity, while overcoming historical disparities and ensuring a just and inclusive transition.