CICERO - Center for International Climate Research

A general equilibrium view of population ageing impact on energy use via labor supply

Taoyuan Wei, Qin Zhu, Solveig Glomsrød

Globally, population ageing is accelerating, i.e., the share of older persons in the population is increasing. The population ageing can have considerable impacts on economic growth, energy use and related carbon emissions, affecting sustainable development. A few studies have analyzed the issue by econometric methods, decomposition and CGE modeling. To facilitate understanding of the simulated results from empirical studies, we developed an analytical general equilibrium model to study the population ageing impact on energy-related emissions, focusing on the long-term potential of economic development by considering the interactions between key productive resources, including labor, capital, and energy. Based on a special case of Cobb–Douglas production function, we show that population ageing can result in considerably less emissions at a lower rate than the ageing in the long term. For example, the reduced global emissions in 2050 can be equivalent to one-recent-year emissions in Japan in the Representative Concentration Pathway (RCP) 8.5 scenario. We also find that the price elasticity of energy supply is the most important parameter to determine the potential impact of population ageing on energy use and related emissions. In the future, the price elasticity of energy supply may become more inelastic than today due to strict climate policy and increasing extraction cost of fossil fuels. Hence, the ageing impact on emissions may be diminishing over time.

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