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Title page 1

Contents 6

Disclaimers 3

Abstract 4

Acknowledgements 5

Main findings 9

1. Introduction 11

2. Baseline business-as-usual scenario (BAU1): slower global potential growth in a warming world 16

2.1. Global output growth continues to moderate and greenhouse gas emissions only fall slowly 16

2.2. Global output per capita growth also slows but less than headline growth 18

2.3. Labour efficiency is the main driver of future gains in output per capita 22

2.4. Convergence toward US living standards is modest in most areas 25

2.5. The thorny temperature-to-climate damage relationship 27

3. The impacts of an energy transition scenario are highly uncertain 29

3.1. Four energy transition scenarios to consider two key sources of uncertainty 30

3.2. Comparing energy transition scenarios 38

References 39

Further reading 44

Annex A. Additional methodological information 45

Annex B. Recent changes to the structure and coverage of the OECD Long-Term Model 48

Annex C. Adding a climate damage channel to the OECD Long-Term Model 72

Tables 7

Table 1. Assumptions for energy transition scenarios 30

Figures 6

Figure 1. Scenario matrix 12

Figure 2. The business-as-usual (BAU1) scenario in a snapshot 17

Figure 3. Global output and output per capita growth 19

Figure 4. Average annual potential output per capita growth from 2025 to 2050 20

Figure 5. Revisions to average annual potential output per capita growth from 2025 to 2050 21

Figure 6. Average annual trend labour efficiency growth from 2025 to 2050 22

Figure 7. Cross-country variation in convergence speeds associated with framework conditions 24

Figure 8. Revisions to average annual trend labour efficiency growth from 2025 to 2050 25

Figure 9. Convergence in living standards out to 2100 is generally modest 26

Figure 10. A selection of climate damage estimates from various studies 27

Figure 11. Cumulative loss of potential output due to climate change 28

Figure 12. Global climate damage curves in scenarios BAU1 and BAU2 29

Figure 13. Global outcomes in energy transition scenario ET1 with comparison to BAU1 33

Figure 14. Impact of energy transition on global potential output per capita in ET1 scenario 34

Figure 15. Impact of energy transition on global potential output per capita in ET2 scenario 35

Figure 16. Impact of energy transition on global potential output per capita in ET3 scenario 36

Figure 17. Impact of energy transition on global potential output per capita in ET4 scenario 36

Figure 18. Impact of transition on potential output per capita by 2050 in ET4 scenario 37

Figure 19. Number of countries with higher output per capita in energy transition scenario than in the relevant business-as-usual scenario 38

Figure 20. Projected level of global potential output per capita 38

Boxes 7

Box 1. The framework for potential output projections and decompositions 13

Box 2. The impact on output of carbon mitigation policies taken in isolation 30

Annex Tables 7

Table A A.1. Main aggregates in the LTM 45

Table A B.1. Countries in the OECD Long-Term Model 49

Table A B.2. Individual countries with no cohort model for which the simplified approach is used 52

Table A B.3. Summary of structural indicators affecting the speed of convergence 56

Table A B.4. Composition of the KOF Swiss Economic Institute economic globalisation index 57

Table A B.5. Estimated equation for mixed convergence in trend labour efficiency 58

Table A B.6. Summary of methodological changes to potential output projections 69

Table A C.1. Global social cost of carbon in the LTM 78

Annex Figures 7

Figure A B.1. Most of the world's population will eventually be in the newly added countries 50

Figure A B.2. The projected evolution of the trend employment rate in a representative low-income African country, from 2025 53

Figure A B.3. Projected trend employment rates 54

Figure A B.4. Frequency distributions for selected framework conditions 56

Figure A B.5. Frequency distribution of implied convergence speeds in 2023 (δ, 2023) 60

Figure A B.6. Some stylised examples of trend labour efficiency growth patterns 61

Figure A B.7. Projected trend labour efficiency growth rates 63

Figure A B.8. Projected trend labour efficiency levels relative to the United States 64

Figure A B.9. Relationship between estimated capital stock per capita and electricity demand in advanced economies in 2019 65

Figure A B.10. Capital stock scrapping rate 66

Figure A B.11. Projected gross fixed capital formation by region 68

Figure A B.12. Projected capital-to-output ratios by region 68

Figure A B.13. Projected trend real GDP per capita relative to the United States by region 69

Figure A B.14. Real GDP per capita relative to the United States 71

Figure A C.1. Schematic view of the approach to climate damages in the LTM 73

Figure A C.2. Global climate damage as a function of the global surface temperature anomaly 77

Figure A C.3. Index of relative sensitivity to climate damage (θ) 81

Figure A C.4. Global environmental damages for 2℃ of warming due to changing country weights 84

Figure A C.5. Temperature anomaly and economic damages in baseline scenario 84

Figure A C.6. Economic damages in 2100 in BAU1 scenario 85

Annex Boxes 7

Box A C.1. Measuring the macroeconomic costs of climate change: top-down and bottom-up approaches 82

초록보기

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. The focus is on illustrating the output trade-off associated with transitioning to low-carbon energy sources, between the shorter-run costs of carbon mitigation and the longer-run benefits of avoided climate damages. Both are subject to considerable uncertainty, which is illustrated using several scenarios that vary according to the steepness of the climate damage curve and how quickly carbon mitigation costs decline. The paper includes two annexes detailing the changes that have been made to the projection framework, the first on the expanded country coverage and revised productivity convergence framework and the second on the new climate damage channel.