As part of the European Green Deal, the EU aims to become climate-neutral and reach net-zero greenhouse gas emissions by 2050. Ιn this context, EU member states are required to develop a national strategy to achieve the required emissions reductions under the Paris Agreement and EU climate goals. Western Macedonia is a region in North-western Greece with its economy largely dominated by lignite mining, lignite-fired power plants and district heating systems. In 2019, the Greek Government set the goal of withdrawing all lignite plants by 2028, with most units being withdrawn already by 2023. This decision has had an immense socio-economic impact on the region of Western Macedonia. This research work reflects the current situation at the socio-economic and socio-political level in Western Macedonia and discusses the policies implemented in the context of the lignite phase-out process to ensure a just transition for households and businesses of the region. Although there is not a ‘one-size-fits-all’ blueprint for successful low-carbon transitions of high-carbon intensive regional economies, the main target of our paper is understanding the impacts, challenges and opportunities of decarbonizing Western Macedonia.

Climate stabilization requires the deployment of several low-carbon options, some of which are still not available at large scale or are too costly. Governments will have to make important decisions on how to incentivize Research and Development (R&D). Yet, current assessments of climate neutrality typically do not include research-driven innovation. Here, we link two integrated assessment models to study R&D investment pathways consistent with climate stabilization and suggest a consistent financing scheme. We focus on five low-carbon technologies and on energy efficiency measures. We find that timely R&D investment in these technologies lowers mitigation costs and induces positive employment effects. Achieving 2 °C (1.5 °C) requires a global 18% (64%) increase in cumulative low-carbon R&D investment relative to the reference scenario by mid-century. We show that carbon revenues are sufficient to both finance the additional R&D investment requirements and generate economic benefits by reducing distortionary taxation, such as payroll taxes, thus enhancing job creation.