October 24, 2011

Effects of the Uncertainty about Global Economic Recovery on Energy Transition and CO2 Price

by Olivier Durand-Lasserve, Axel Pierru and Yves Smeers

- This paper examines the impact that uncertainty over economic growth may have on global energy transition and CO2 prices. We use a general-equilibrium model derived from MERGE, and define several stochastic scenarios for economic growth. Each scenario is characterized by the likelihood of a rapid global economic recovery. More precisely, during each decade, global economy may - with a given probability - shift from the EIA's (2010) loweconomic-growth path to the EIA's (2010) high-economic-growth path. The climate policy considered corresponds in the medium term to the commitments announced after the Copenhagen conference, and in the long term to a reduction of 25% in global energy-related CO2 emissions (with respect to 2005).

Durand-Lasserve, O., A. Pierru and Y. Smeers (2011). "Effects of the Uncertainty about Global Economic Recovery on Energy Transition and CO2 Price." Core Discussion Paper No. 2011/28, Jul 2011.