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Effects of the Uncertainty about Global Economic Recovery on Energy  Transition and CO2 Price / Durand-Lasserve, O., A. Pierru and Y. Smeers.  MIT CEEPR Working Paper No. WP-2011-003, Mar 2011, 28 p.http://web.mit.edu/ceepr/www/publications/workingpapers/2011-003.pdfThis paper examines the impact that uncertainty over economic growth may have on global energy transitionand CO2 prices. We use a general-equilibrium model derived from MERGE, and define several stochasticscenarios for economic growth. Each scenario is characterized by the likelihood of a rapid global economicrecovery. More precisely, during each decade, global economy may - with a given probability - shift from theEIA's (2010) low-economic-growth path to the EIA's (2010) high-economic-growth path. The climate policyconsidered corresponds in the medium term to the commitments announced after the Copenhagenconference, and in the long term to a reduction of 25% in global energy-related CO2 emissions (with respectto 2005). For the prices of CO2 and electricity, as well as for the implementation of CCS, the branches of theresulting stochastic trajectories appear to be heavily influenced by agents’ initial expectations of futureeconomic growth and by the economic growth actually realized. Thus, in 2040, the global price of CO2 mayrange from $21 (when an initially-anticipated economic recovery never occurs) to $128 (in case of nonanticipatedrapid economic recovery). In addition, we show that within each region, the model internalizesthe constraints limiting the expansion of each power-generation technology through the price paid by thepower utility for the acquisition of new production capacity. As a result, in China, the curves of endogenousinvestment costs for onshore and offshore wind are all bubble-shaped centered on 2025, a date whichcorresponds to the establishment of a global CO2 cap-and-trade market in the model. (© Durand-Lasserve, Pierru, Smeers)