Impact of the energy transition on long-term factor productivity

In this article, we propose to build a statistical model for factor productivity and illustrate our predictions on a common toy model : DICE. Data show that the variation of primary exergy, or simply called exergy is a good predictor of the TFP variation. That remark allows us to design new economic scenarios that respect the Paris Agreement. These scenarios are of particular interest for policy makers. Moreover, our model is capable to reconcile different projections by the introduction of environmental constraints. On one hand, if exergy increases, we have similar projections with standard economic models. On the other hand, if exergy decreases, we obtain projections closer to other Integrated Assessment Models, where economic output declines (Meadows et al., 2013; Capellán-Pérez et al., 2020).