Title: Economic Implications of the IEA Efficient World Scenario
Abstract: In its 2012 edition of the World Energy Outlook, the International Energy Agency (IEA) produced an Efficient World Scenario (IEA, 2012) to assess how implementing only economically viable energy efficiency measures would affect energy markets, investment and greenhouse emissions (GHG).The IEA analysis found that in order to halve global primary energy demand over 2010-2035, additional investments of USD 11.8 trillion in more efficient end-use technologies would be necessary.Using the OECD ENV-Linkages macro-economic model, this report simulates the economic and environmental impacts which the IEA Efficient World Scenario implies.The core of this analysis draws upon the careful consideration of energy efficiency investments and the induced structural reallocation of primary production factors, across sectors and regions.This analysis also takes into account additional energy and environment policies from the Efficient World Scenario (EWS), such as fossil fuel subsidy reform in emerging countries, regional carbon prices, electricity regulations, etc.While the link between energy savings and necessary investments is calibrated, the OECD model simulates the whole panoply of possible economic impacts, such as changes in consumption behaviours, firms' technological choices and international trade flows.Among the expected benefits, the EWS scenario brings about vast reductions in GHG emissions, primarily (but not solely) due to reduced energy consumption.According to model simulations, achieving the EWS Scenario would imply an increase in global GDP of 1.1% relative to the baseline, in 2035.The scenario would clearly benefit most countries, with the exception of certain energy exporters who would see the demand for their energy decline.In addition to a shift towards more capital-intensive and less energy-intensive technologies, there would also be a significant rise in the demand for domestically-produced services, transport equipment and construction, as these sectors are the main recipients of investments.Such effects will impact countries' relative competitiveness in supplying certain goods or services, and thus lead to changes in regional trade landscapes.Moreover, the EWS Scenario implies some employment reallocations, most notably between sectors in non-OECD economies.The bulk of these employment adjustments would be shifted away from energy intensive industries and towards the service and manufacturing sectors.