PNNL

Abstract

In this paper we contribute to a long history of research studying interactions between energy systems, international energy trade, and macroeconomic activity. We develop and employ methods to quantify transmission pathways for energy markets to affect the macroeconomy and CO2 emissions. We track the long-term consequences of a hypothetical permanent disruption to global energy markets, cession of Russian fossil fuel exports, for energy markets, regional and global economic activity (GDP), labor and capital markets, and CO2 emissions against two dramatically different reference scenarios. Our jumping off point is international energy markets’ reaction to the shock including energy prices, energy systems responses, and energy trade effects. We find that fossil fuel exports contribute roughly one-half-trillion dollars/year to Russian GDP in 2050, largely through energy balance-of-trade effects, but with important induced effects on Russian labor productivity, domestic energy productivity, and capital accumulation. We find that global GDP is largely unaffected by the loss of Russian fossil fuel exports, but regional effects are more heterogeneous with fossil fuel exporters benefitting, e.g., the Middle East, initially through enhanced energy balance of trade. In contrast energy importing regions’ GDPs, e.g. India, are more affected by energy availability and price effects.