Long-term scenarios: incorporating the energy transition

Yvan Guillemette and Jean Château

No 33, OECD Economic Policy Papers from OECD Publishing

Abstract: This paper describes the latest update of the OECD’s long-term scenarios, which are done every 2-3 years to quantify some of the most important long-term macroeconomic trends and policy challenges facing the global economy. For the first time, this update incorporates the effect of the low-carbon energy transition. The study first presents a baseline projection that acts as a business-as-usual scenario against which the economic effects of the transition can be gauged. Next, it outlines extensions to the OECD global long-term model (LTM) to consider energy use and associated CO2 emissions and describes an alternative stylised scenario in which OECD and non-OECD G20 countries successfully transition to low-carbon energy in a way broadly consistent with a net-zero target for greenhouse gas emissions by 2050. These extensions rely on a variety of sources, but most crucially on simulations of CO2 mitigation costs with the OECD’s ENV-Linkages model. Finally, the model’s extensions are used to explore some fiscal implications of the energy transition, in particular how the negative economic effects of carbon mitigation could be alleviated by fiscal or other structural reforms.

Keywords: CO2 emissions; CO2 mitigation costs; energy transition; fiscal pressure; fiscal sustainability; long-term projection; long-term scenario; revenue recycling (search for similar items in EconPapers)
JEL-codes: H68 J11 O4 Q43 (search for similar items in EconPapers)
Date: 2023-12-14
New Economics Papers: this item is included in nep-ene and nep-env
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:oec:ecoaab:33-en

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