SOCIO - ECONOMIC B E N E FI T S

GLOBAL WELFARE

The energy transition generates broader socio-economic benefits, in addition to higher GDP and
employment. GDP fails to capture human well-being, which includes health, education and the
environment. As a result, focusing only on GDP may hamper movement towards truly
sustainable and inclusive development. The welfare indicator in this analysis adopts the widely
accepted three dimensions of sustainable development: economic, social and environmental
(IRENA, 2016).

The economic dimension is measured by total employment and by consumption plus investment
(i.e., current expenditure plus the future benefits of improved capital stock). The social
dimension is a proxy for human capital, considers total (public and private) expenditure in
education, and (reduction of) health impacts from air pollution. The environmental dimension
focuses on (reduction of) GHG emissions and the depletion of natural resources through
consumption of materials (measured in direct material consumption of minerals and biomass for
food and feed, excluding fossil fuel energy resources).

This analysis obtains six sub-indicators, two for each dimension of sustainability (see Figure 24)
which are aggregated into an overall welfare indicator. The weighting of each sub-indicator
should ideally depend on the relative importance that a society gives to each, but for this
analysis we weighted all sub-indicators equally.

Figure 24. Components of the welfare indicator used in this analysis

as Spen
ouse gs educ ding o
nh sion atio n
ree mis n
e
G

re
lfa Soc
we
Healt air oplluti om
ial

local
al

wel
t
ironmen
cons umption

h i m apct s fr
fare
Ma etrial

En v

WELFA
on

RE
Eco
nomi cwelf are
C
an ons
d i um t
nve ption men
st m loy
ent Emp

Source: Based on IRENA,

2016

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