OECD global long‑run economic scenarios

Main findings

This paper presents updated and extended long-run economic scenarios. The projection horizon has been extended to 2100 and the underlying Long-Term Model now incorporates the full global economy, a revised supply-side framework, and allows for the impact of climate damages on output. To highlight some of the uncertainties about the costs and benefits of the climate transition, the paper considers six scenarios with differing assumptions about the speed of the energy transition, the pace at which carbon mitigation costs decline and the extent of climate damages.

Business-as-usual baseline scenarios

• The analysis considers two business-as-usual scenarios in which decarbonisation of the energy mix and improvements in energy efficiency continue along recent trends. The first is based on a median climate damage curve and the second on a high climate damage curve within the wide range found in the scientific literature.

• In the scenario with a median climate damage curve, global annual potential output growth is projected to moderate gradually from around 2.9% today to 2.7% in the first part of the 2030s, 2.1% in the early 2040s and remain around 1.3% in the latter part of the century. This moderation reflects declining working-age population growth and slowing trend labour efficiency growth in the emerging-market economies. China remains the world’s largest economy until the mid-2060s when it is surpassed by India.

• Global annual potential output per capita growth slows by less than the overall output, falling from about 2% today to 1¼ per cent by 2050 and remaining broadly stable thereafter.

• Insufficiently rapid progress on reducing greenhouse gas emissions implies continued global warming. The global average surface temperature anomaly continues to increase throughout the projection period and reaches 2½ °C in 2100. The reduction in global output associated with climate change, estimated to be approximately 1¾ per cent of global GDP today, rises to nearly 9% by 2100.

• With a steeper climate damage curve, at the high end of recent estimates, projected climate damages reduce global output by 36% by 2100.

Energy transition scenarios

• In the energy transition scenarios, all countries accelerate decarbonisation and energy efficiency efforts, eliminating coal as an energy source by 2050 and lowering the shares of oil and gas in primary energy to 5% and 10%, respectively, by then. This scenario limits the global temperature increase to 1.6°C by 2100, meeting the Paris climate agreement goal.

• The impact of the global energy transition on output trajectories is highly uncertain. Four scenarios illustrate different possibilities:

  • With a median climate damage curve and a slow decline in mitigation costs, global output remains lower in 2100 than in the corresponding business-as-usual scenario.

  • With a median climate damage curve and a quick decline in mitigation costs, the energy transition becomes a net positive for global output around 2085.

  • With a high-damage curve and a slow decline in mitigation costs, the energy transition becomes a net positive for global output in the mid-2050s.

  • With a high-damage curve and a quick decline in mitigation costs, the energy transition becomes a net positive for global output in the mid-2040s. All 139 countries modelled individually are net beneficiaries by 2080.

• In terms of projected levels of global potential output per capita, the scenario with a median climate damage curve and a quick decline in mitigation costs presents the most optimistic outlook, with global living standards higher than in the business-as-usual counterpart by the end of the century.