Value Added in Motion: Macroeconomic Implications of Energy Price Trajectories

Abstract

Taking a 2035 horizon, we examine how world energy consumption and emission patterns will be shaped by the changing demand and technological capabilities of different regions. We combine a convergence model fitting three production factors (capital, labour and energy) and two factor-specific productivities, along with a dynamic CGE model of the world economy. We consider three possible "worlds" with very different energy scarcity, and how Copenhagen pledges change economic agents' calculus in each of these three situations. We find that the most dramatic changes in terms of location of value added are to be expected from the intrinsic differences among the three considered "worlds", not so much in terms of economic impact of environmental pledges.

Value Added in Motion: Determinants of Value Added Location within the EU

“…The key insights on the future geography of economic activity in Europe have been well documented in other research pillars of the "Value Added in Motion (VAM)" project: International Migration patterns (Docquier and Machado 2015); World Trade patterns ; Macroeconomic implication of energy prices (Fontagné, Fouré and Santoni 2015). We now take stock of these findings.…”