Description:
The biophysical foundation of socio-economic systems are underrepresented in the vast majority of macroeconomic models. This lack is particularly troublesome when considering the links between energy, matter and the economy in light of the energy transition. As a remedy, we propose here a biophysical stock-flow consistent model combining detailed bottom-up estimates for the high capital intensity of renewable energies and the decreasing energy return on investment (EROI) of fossil fuels. We find that the completion of a global energy transition scenario compatible with the Paris Agreement leads to highly inflationary dynamics and requires a temporary "war economy", characterized by a high saving rate. Our results further indicate that macroeconomic conditions can be smoothed out by a reduction in the desired growth rate of the economy, and call for further work on post-growth scenarios studies