Socially fair decarbonization pathways for housing and mobility – Insights from a multi-model analysis for Austria

The supposed regressivity of primarily price-based climate protection policy instruments often hampers an evidence-based discussion at the political level and is used as an argument against the implementation of corresponding measures. To assess the distributional implications of decarbonization, we developed climate policy scenarios for the buildings and mobility sectors including targeted compensation measures in close cooperation with stakeholders to identify socially acceptable pathways. Subsequently, three bottom-up sectoral models (for transport demand, vehicle choice and the building stock) were linked to a macroeconomic model to analyze the emission impact, the macroeconomic ramifications and the distributional effects of the policy portfolios on different household types. Our modeling results show that full decarbonization of housing and mobility in Austria by 2040 is achievable but requires (1) a comprehensive policy portfolio with rapid implementation to ensure the phase-out of fossil fuels and (2) targeted compensation for low- and middle-income households to enhance fairness and public acceptance. While climate policies have positive macroeconomic effects, they risk exacerbating income inequalities unless compensation measures, such as recycling revenues from carbon pricing, are implemented. These measures can help mitigate adverse distributional effects and enable investments in renovation, new heating systems and sustainable transport infrastructure, ensuring a just transition. • We analyze two policy portfolios for decarbonizing mobility and housing in Austria. • We engage stakeholders to design compensation measures for vulnerable households. • Our novel approach links one macroeconomic and three sectoral bottom-up models. • We explore macroeconomic impacts, vertical and horizontal distributional effects. • Results provide guidance for designing effective and equitable climate policies.