Regional modeling is essential for assessing the impacts of environmental policies in countries with significant regional diversity. It is particularly important for a resource-constrained state like Kerala (India), which depends heavily on electricity imports from other states. The novelty of this study lies in the development of a state-level Integrated Assessment Model (IAM) that links a recursive multi-regional dynamic computable general equilibrium model with a bottom-up energy model, considering region-specific parameters. To the best of our knowledge, such a state-level regional modeling framework for India has not been developed in the existing literature, thereby addressing an important research gap in assessing region-specific pathways and policy impacts. This paper explores the economic and employment implications of the green transition for Kerala. The contributions to the literature are (a) regional modeling; (b) a framework and assessment of the impact of green transition considering the interlinkage between the state, the rest of India, and the rest of the world; and (c) estimation of required investment and effect on employment generation. The findings suggest that reducing fossil electricity imports without expanding renewable energy infrastructure may constrain economic growth (Policy Scenario 1). In contrast, investments in local renewable energy capacity through revenue recycling, along with improvements in energy efficiency and productivity (Policy Scenario 2), can enhance economic returns and generate more employment. There is an increase in real state domestic product, consumption, investment, returns to factors, and employment in Policy Scenario 2 as compared to the baseline and Policy Scenario 1. Both final energy requirement for fossil fuel and emissions are also lower in Policy Scenario 2. Energy efficiency can be enhanced through investments in efficient technologies, smart grids, low-emission transport systems, and modern energy infrastructure. Productivity improvements require skill development, innovation-oriented policies, and support for entrepreneurship. Green transition also presents an opportunity for Kerala to strengthen energy security through the expansion of renewables.