Comparative Regional Economy <Lecture Note 8> 2013.12.12

CRE: World Regions by 2050

* Some parts of this lecture note are borrowed from some references for teaching purpose only.

Professor Yoo Soo Hong Thursday: 9-12 a.m. Office Hour: By Appointment E-mail: yshong123@gmail.com M.P. 010-4001-8060 Home Page: ://yoosoohong.weebly.com

1

Economic Growth

2

Global Outlook

• Asia

• Australasia

• North Africa and Middle East

• Sub-Saharan Africa

• Western Europe

• and • North America

• and • Latin America

3.5%4.3% 4.6%

0.0%

2.0%

4.0%

6.0%

2011 2012 2013 -2016

4.3%

3.6%

4.2%

3.0%

3.5%

4.0%

4.5%

2011 2012 2013 -2016

3.1%

4.0%

4.7%

0.0%

2.0%

4.0%

6.0%

2011 2012 2013 -2016

4.4% 3.8%4.8%

0.0%

2.0%

4.0%

6.0%

2011 2012 2013 -2016

1.7%

-0.3%1.3%

-1.0%

0.0%

1.0%

2.0%

2011 2012 2013 -2016

1.8% 1.9% 2.2%

0.0%

1.0%

2.0%

3.0%

2011 2012 2013 - 2016

Source: Economic Intelligence Unit, March 2012

Source: Economic Intelligence Unit, March 2012

The global economy is on a narrow path of slow and fragile recovery. Many countries are struggling with a massive debt burden and high unemployment persisting to bog down their economies and hampering growth..

Oil and commodity prices remain high and will continue to put further pressure on the global economy.

According to the Economist Intelligence Unit’s (EIU) March economic outlook, world GDP is expected to grow by 2.1% on a market exchange rates basis in 2012, slowing down markedly from the previous two years.

Source: Economic Intelligence Unit, March 2012

Changes in Global Economic Risks

North American region

Asia pacific region

Middle East region

African regionLatin America & the Caribbean region

Greater Russia region

Europe region

Source: Energy Policy Scenarios to 2050, World Energy Council (values in mn tonnes)

Production (Mn tonnes)

Consumption (Mn tonnes)

Compounded annual growth rate consumption

Legend

0.9%0.9%

1.8%1.8%

1.2%1.2%

0.8%0.8%

- 2.4%

- 2.4%

- 1.2%

- 1.2%

- 0.9%

- 0.9%

Global Outlook

The economy grew by 1.7% in 2011, but grew by 2.8% in Q4 of 2011.

The inflation rate for 2011 doubled to 3.2% from 1.6% in 2010.

Growth prospects for Q1 2012 are around 2 to 2.2% on the back of a gain in consumer confidence’s subsequent retail sales and manufacturing.

Persistently high unemployment and risks of downturns in markets abroad will keep the FED’s policy rate at very low levels until even as late as 2014.

United States

European economic growth slowed during 2011 to 1.5% and is expected to contract further in 2012 to -0.3%, before a modest recovery in 2013.

Inflation should remain relatively low and contract to around 2.2% in 2012 from the 2.7% observed in 2011.

The European debt crises threatened to derail global recovery for the last two years

Europe

Manufacturing in Japan is already experiencing a v-shaped recovery after the March 2011 earthquake and tsunami.

GDP is expected to grow at around 1.5% in 2012 on the back of reconstruction activities and a recent upswing in machinery exports and local consumption.

Japan

Emerging Markets

The BRIC countries are recognised as having very large economies and populations, with unravelled growth potential in foreseeable years.

The Brazilian economy experienced rapid expansion in the last decade with strong economic growth

Russia experienced strong economic growth over the past few years, but manufacturing and foreign investment slowed down since the global downturn.

BRICS

The Next 11 consist of South Korea, Iran, Mexico, Turkey, Philippines, Indonesia, Egypt, Nigeria, Pakistan, Vietnam and Bangladesh.

These economies are smaller in size than the BRIC countries, but with its large population size and growth rates of above the global average, promises favourable opportunities for future investment and market growth.

The Next 11

Fears surrounding an economic downturn have lead EM central banks to either cut their interest rates or postpone monetary tightening during 2011.

Market expectations are that EM countries will outperform developed countries between 2013 - 2016, as interest rate differentials will favour investment into these EM countries over that of the OECD economies.

Key Drivers of Long-term GDP Growth

Growth in the physical capital stock, which is determined by new capital investment less depreciation of the existing capital stock

Growth in the labor force

Growth in the quality of labor (human capital), which is assumed to be related to current and projected average education levels in the workforce

Technological progress, which drives improvements in total factor productivity (TFP)

9

Projected Real Growth in GDP and Income Per Capita2007-50 (% pa)

10

Projected Real Growth Rates of Emerging Economies: 2007-50 (% pa)

11

Other Emerging Economies

− Vietnam: it has the potential to be of similar scale to Turkey by 2050, although still only around 70% of the projected size of the UK economy.

− Nigeria: it stands out as having considerable growth potential, not far behind India in terms of projected annual growth, close to Turkey in terms of projected size and overtaking Egypt and South Africa to become the largest African economy by 2050.

− Pakistan also ranks relatively high in growth terms, due in part to having one of the highest projected population growth rates. recent political problems do not pose a barrier to fulfilling the country’s long-term economic potential. Political problems are major downside risk factors at present.

12

− Malaysia and Thailand have more solid track records of long-term economic growth.

− Saudi Arabia has more modest projected GDP per capita growth, reflecting its relatively high initial average income levels, but one of the fastest projected population growth rates up to 2050 according to the UN.

− At the bottom of the emerging market growth rankings are Russia and Poland. This reflects their much less favorable demographics with UN projections indicating declining, rapidly ageing populations in both countries over the period to 2050.

13

The ‘‘Market First’’ Scenario

- It is the high-growth, high-globalization, world peace scenario that is similar to many other optimistic projections that are often used as a starting point for discussing global futures. These assumptions produce another golden age of growth, with world growth and growth in most regions higher than in the last 20 or 50 years.

- Projected productivity gains include assumptions about both the creation and introduction of new technology into the production process, and the adoption of previously developed technology by the less-developed countries. There is clearly much scope for the latter leading to the possibility of enhanced growth rates, but there is also no scientific way of forecasting how much convergence will be achieved nor what growth enhancing or growth-retarding polices will be followed in each country.

14

Sources: 2006–50 from IFs, Market First scenario, model version 5.21, and by assumption. Historical data fromMaddison (2003) with extensions by author.

Economic Growth in the Market First and Trend Scenarios Compared to Historical Growth Rates

15

The Trend Growth Scenario

- In the Trend Growth scenario per capita growth rates in the non-OECD countries as a whole are less than a half percentage point per year below than in the Market First scenario, but the growth assumptions are cut drastically in the countries where most of the poverty is—sub-Saharan Africa, North Africa, and a few Asian states. The Market First scenario assumes very large increases in economic growth in these countries, compared to the recent past.

- In some regions the trend-growth assumptions do not do much to raise poverty because there is not much extreme poverty to begin with in the region or because the trend rates of economic growth are high Sub-Saharan Africa, which was helped in the Market First scenario by some extremely favorable assumptions about policy changes—if not regime changes—is seriously hurt. By 2050, the extreme poverty rate rises to over 1 billion people.

16

Poverty Headcounts and Poverty Ratios in Developing Regions

17

Developing World and Economic Growth Catch-up Selected developed and developing countries, 2005 and 2050, projected GDP per

capita in PPP terms . Source: Price Waterhouse Coopers 2013 figure 8.

http://www.pwc.com/gx/en/world-2050/pdf/world2050emergingeconomies.pdf

18

The Best Way to Promote Long-Run Economic Growth

- Free markets and private property are better at generating growth than

centralized government control of production, but a strong government

role is nonetheless essential to enforce the rules of peaceful economic

behavior and alleviate inevitable market failures.

- Trade and financial market liberalization is needed to spur competition and

the flow of investment funds, including increased access to developed-

country goods and capital markets.

- Democratic accountability of government is helpful, to keep both

corruption and predation from destroying incentives to work, save,

and invest, and to encourage growth spending on education, health,

and infrastructure.

19

Dreaming with BRICs: the Path to 2050

− Over the next 50 years, Brazil, Russia, India and China-the BRICs economies-could become a much larger force in the world economy. We map out GDP growth, income per capita and currency movements in the BRICs economies until 2050.

− The results are startling. If things go right, in less than 40 years, the BRICs economies together could be larger than the G6 in US dollar terms. By 2025 they could account for over half the size of the G6. of the current G6, only the US and Japan may be among the six largest economies in US dollar terms in 2050.

− The list of the world’s ten largest economies may look quite different in 2050. The largest economies in the world (by GDP) may no longer be the richest (by income per capita), making strategic choices for firms more complex.

20

Overtaking the G6: When BRICs’ US$GDP Would Exceed G6

21

GDP(2003 US$bn)

BRICs Have a Larger GDP than the G6In Less Than 40 Years

22

BRICs Share of World GDP

GDP(2003 US$bn)

23

The Largest Economies in 2050

GDP(2003 US$bn)

24

Economic Growth

− India has the potential to show the fastest growth over the next 30 and 50 years. Growth could be higher than 5% over the next 30 years and close to 5% as late as 2050 if development proceeds successfully.

− Overall, growth for the BRICs is likely to slow significantly over this time frame. By 2050, only India on our projections would be recording growth rates significantly above 3%.

25

China Overtakes the G3; India is Close Behind

GDP(2003 US$bn)

26

India Shows Most Rapid Growth Potentialof the BRICs

GDP(2003 US$yoy)

27

Will China rule the world? Will India be the next superpower?

Biggest Population, biggest consumer of resources, biggest economic surplus and reserves . GDP one-sixth of US, 90th in world p.c.

DemographyPopulation ageing problem, solution not in sight. No ‘rescue’ from migration.‘Lewis point’ exaggerated.Population homogeneous, minorities small.

EnvironmentWorst global environment. Biggest greenhouse contributor. Unsafe water, air, food, medicine. Water shortage in North. Climate change threats: 150 million people in LECZ.

PoliticsRigid party control ; Corruption and local oppression, inequality, environment, eventual political instability?Isolated internationally, influence through money,

Huge economic, social growth 2002 –11:Projected urban growth 380 million – 600 million 2030, energy demand 3x by 2030.. 80% of India unbuilt.

DemographyPopulation growth problem. No ageing problem yet. Uneven regional transition.

Environment Nearly worst global environment 125th / 132 in 2012 GEP IndexWater insecurity, 4% of world’s fresh water with 17% of populationResource consumption unsustainable.Climate change threat: (hotter, wetter).

PoliticsPlus: judiciary, press, democracy, civil society, unity despite diversityMinus – corruption at all levels, clientism, subsidised prices, heavy bureaucracy.‘Permit Raj’ lives; high and growing inequality

28

Incomes and Demographics

− Despite much faster growth, individuals in the BRICs are still likely to be poorer on average than individuals in the G6 economies by 2050. Russia is the exception, essentially catching up with the poorer of the G6 in terms of income per capita by 2050. China’s per capita income could be similar to where the developed economies are now. By 2030, China’s income per capita could be roughly what Korea’s is today. In the US, income per capita by 2050 could reach roughly $80,000.

− Demographics play an important role in the way the world will change. Even with the BRICs, demographic impacts vary greatly. The decline in working-age population is generally projected to take place later than in the developed economies, but will be steeper in Russia and China than India and Brazil.

29

Global Demand Patterns

− As early as 2009, the annual increase in US dollar spending from the BRICs could be greater than that from the G6 and more than twice as much in dollar terms as it is now. By 2025 the annual increase in US dollar spending from the BRICs could be twice that of the G6, and four times higher by 2050.

Currency Movements

− Rising exchange rates could contribute a significant amount to the rise in US dollar GDP in the BRICs. About 1/3 of the increase in US dollar GDP from the BRICs over the period may come from rising currencies, with the other 2/3 from faster growth.

− The BRICs’ real exchange rates could appreciate by up to 300% over the next 50 years (an average of 2.5% a year). China’s currency could double in value in ten year’s time if growth

30

Incremental Demand From the BRICs

GDP(2003 US$bn)

31

Global Poverty in 2050

- Population growth creates need; income growth creates effective demand. Taken together, world food demand could double by 2050.

- How many hundreds of millions of presently low income people are lifted out of their poverty will be the most important determinant of the future size of global food and agricultural product consumption.

- This will depend heavily on – how “pro-poor” a development strategy each LDC follows, including the

majority of the poor who live in rural areas– how open high income countries are to import goods in which LDCs have

a comparative advantage– how positive an investment climate an LDC maintains – for both local and

international investors

32

Poverty Headcount at ‘‘$1’’ a Day (millions of people and percent)

33

Long-Run Development Goals

- Poverty reduction – 70% rural

- Agricultural development is necessary, but not sufficient.

- Allow each country’s agricultural sector to contribute as much as possible to national development as consistent with economic efficiency and environmental sustainability

– Food supply– National Economic Growth (GDP)– Foreign exchange earnings– Employment

34

Projected Average Real GDP Growth: 2007-50

35

E7 Economies Could Grow to Significant Size by 2050

- Brazil could be bigger than Japan and Russia and Mexico could be bigger

than Germany or the UK.

- India has strengths in: IT skills and technologies, low cost English speaking

staff for offshoring services.

- China has advantages in: low cost manufacturing, higher average education

level, higher savings and inestment.

- Average GDP per capita in E7 could by 2050 reach current G7 levels

(but still well below projected G7 levels in 2050)

36

China and India Dominate E7 Economies (Relative GDP at MERs)

Index: US= 100

37

Private Sector Could Help to Reduce Poverty

- Foreign direct investment and technology transfer to LDCs

- Raise internal food safety standards in LDCs

- Create marketing opportunities for LDC small-holders

- Be advocates in OECD countries for food and agricultural trade liberalization

- Be advocates for LDC development strategies that lift the maximum number

of people out of poverty

- Advocate public investment in enabling environment in LDCs, including from

ODA and World Bank

- Stop implicitly affirming the anti-trade, anti-business, anti-growth and anti-

science agendas of transnational NGOs which purport to speak for LDCs and the poor.

38

Population

39

World Population Outlook 1950-2050

• Total population for 2050 will reach 9.078 billion

• Population for 2003 was expected to be 6.302 billion

• In spite of higher population for the future, the growth rate of the population is expected to fall due to the decline in fertility rate and the toll taken by the HIV/AIDS pandemic in some countries. Also due to the ethnic cleaning and treats as SARS.

• Fertility rate decline – family planning• Increase in population but decrease in average annual growth rate. e.g. 1.16% in 2003 but 0.43% in 2050

40

Population Growth at a Slower Pace

0.0

3.0

6.0

9.0

12.0

1750 1800 1850 1900 1950 2000 2050

Tota

l p

op

ula

tion

(b

illion

s)

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

An

nu

al in

cre

men

ts (

billion

s)

Source: UN, World Population Assessment 2006 41

42

43

44

Population by Region1950-2050

• World population growth will be concentrated in developing countries for the foreseeable future

• Population for Asia, Africa, Sub Saharan Africa, Middle East, North America and South America will increase substantially

• Population for European countries and Former Soviet Union tends to fall for the foreseeable future

• Not much different for the population for Oceania and Baltic region

45

Top 10 Most Populated Countries for 2003 and 2050

Countries Ranked by Population: 2003

RankCountry

Population

     

1 China 1,286,975,46

8

2 India 1,049,700,11

8

3 United States 290,342,554

4 Indonesia 234,893,453

5 Brazil 182,032,604

6 Pakistan 150,694,740

7 Russia 144,526,278

8 Bangladesh 138,448,210

9 Nigeria 133,881,703

10 Japan 127,214,499

Countries Ranked by Population: 2050

Rank Country Population

     

1 India 1,601,004,572

2 China 1,417,630,630

3 United States 420,080,587

4 Indonesia 336,247,428

5 Nigeria 307,420,055

6 Bangladesh 279,955,405

7 Pakistan 267,813,495

8 Brazil 228,426,737

9 Congo (Kinshasa) 181,260,098

10 Mexico 153,162,145

46

Demographic Changes in the World

Africa

47

Fertility Patterns Some contrasting total fertility levels 2011 - 2012The West Developing world East AsiaTFR stable or increasing TFR mostly going down. TFR very low, little changeSome higher TFRs Some lower / declining TFRs

Ireland 2.05 Sri Lanka 2.17 Japan 1.39Iceland 2.04 Turkey 2.13 S. Korea 1.23New Zealand 2.03 Nicaragua 2.08 Taiwan 1.01France 2.00 Karnataka 2.00 Singapore 0.78UK 1.91 Vietnam 1.89Sweden 1.90 Chile 1.87Australia 1.89 Iran 1.87US 1.89 Uzbekistan 1.86Norway 1.88 Brazil 1.82Finland 1.83 Lebanon 1.76Belgium 1.81 Kerala 1.70Netherlands 1.76 Tamil Nadu 1.70Lithuania 1.76 Thailand 1.66Denmark 1.73 China 1.55

Source: Eurostat, national statistical yearbooks. 48

Trends in Fertility Rates 1990 - 2012

49

Estimated and projected period TFR in China through 2050: Expert-based projection (main estimate and 80% confidence interval) as compared with three rounds of UN projections and estimates (From Basten et al. forthcoming)

Expert Views of Low Fertility for China, 1990 - 2050

50

Developing World Ageing Overtake NW Europe Age Dependency Ratios ((pop 65+ / pop 15-64)*100), selected European and developing countries 2010 –

2060. Source: UN 2012, medium variant.

Age dependency ratios, 2010 - 2060, selected developed and developing countries. Source: UN 2012 medium variant.

0

10

20

30

40

50

60

70

80

2010 2015 2020 2025 2030 2035 2040 2045 2050 2055 2060

Spain

Germany

China

Iran

France

UK

Brazil

Sweden

Turkey

Mexico

India

51

52

(Number of Years for Percent of Population Age 65 or Older to Rise from 7% to 14%)

26

45

45

47

53

65

69

73

85

115

Japan 1970-1996

Spain 1947-1995

United Kingdom 1930-1975

Poland 1966-2013

Hungary 1941-1994

Canada 1944-2009

United States 1944-2013

Australia 1938-2011

Sweden 1890-1975

France 1865-1980

More developed countries Less developed countries

41

27

26

25

24

23

22

21

20

19

Azerbaijan 2000-2041

Chile 1998-2025

China 2000-2026

Jamaica 2008-2033

Tunisia 2008-2032

Sri Lanka 2004-2027

Thailand 2003-2025

Brazil 2011-2032

Colombia 2017-2037

Singapore 2000-2019

Speed of Population Aging in Selected Countries

Natural Resources and Energy

54

Fresh Water (Per Capita)

Sources: Earthlab, UN Environment Program 55

Energy Intensity

Economic growth is closely related to growth in energy consumption because the more energy is used, the higher the economic growth. However, it is possible to decouple energy consumption and economic growth to some extent. More efficient use of energy may entail economic growth and a reduction in energy use.

Economist Intelligence Unit, KPMG calculations

Cumulative Investment in Energy Infrastructure Require 2011 – 2035

Natural Gas - $9.5 trillion

Bio-Fuels - $0.3 trillionCoal - $1.1 trillion

Power- $16.9 trillion

World Energy Outlook 2011, (2010 real terms)

0

50

100

150

200

250

300

Res/Comm Transportation Industrial Electricity Generation

2010

2025

2040

Quadrillion BTUs

Electricity Generation Leads Growth

58

0

50

100

150

200

250

Oil Gas Coal Nuclear Biomass/Other Wind / Solar /Biofuels

Hydro / Geo

0.7%

Quadrillion BTUs

Energy Mix Continues to Evolve

2010

2040

-0.2%

1.6%

2.2% 0.3%

6.0% 1.6%

Average Growth / Yr. 2010 - 2040

0.9%

59

0

150

300

450

600

750

EuropeOECD

N. America OtherOECD

China Africa India LatinAmerica

Russia/Caspian

MiddleEast

Other NonOECD

Million Households

Household Growth Drives Residential Demand

2010

2040

2040

60

0

30

60

90

120

150

1990 2015 2040

Quadrillion BTUs

Commercial

Residential

By Sector

Residential/Commercial Demand Grows

-10

-5

0

5

10

15

20

25

30

35

'10 - '40 '10 - '40

Electricity

Other

OECDNon OECD

Fuel GrowthQuadrillion BTUs

Biomass

0

30

60

90

120

150

1990 2015 2040

Quadrillion BTUsBy Region

China

OECD

Rest of Non OECD

India & Africa

61

0

10

20

30

40

50

1990 2015 20400

10

20

30

40

50

1990 2015 2040

Commercial Transportation Drives Demand Growth

PersonalMBDOE

CommercialMBDOE

Light Duty Vehicles

Aviation

Marine

Rail

Heavy Duty Vehicles

62

Avg New Car Fuel Efficiency in 2040

0

10

20

30

40

50

60

70

80

US Europe China Japan India

On-Road MPG

2010

0

10

20

30

40

50

60

70

80

US Europe China Japan India

2010

2020-2025 Target2015 Target

0

250

500

750

1000

1250

1500

1750

2000 2020 2040

Million Vehicles

Rest of OECD

Rest of Non OECD

China

United States

Light Duty Vehicle Fleet by Region

Impact of Global Fleet Shift on Efficiency

0

250

500

750

1000

1250

1500

1750

2000 2020 2040

Million Vehicles

Conv. Gasoline

Conv. Diesel

Hybrid

PHV/EV

Natural gas/LPG

63

0

50

100

150

200

250

1990 2015 2040

Quadrillion BTUsBy Region

China

OECD

Rest of Non OECD

Industrial Fuel Demand Diversifies

-10

0

10

20

30

40

50

60

70

'10 - '40 '10 - '40

Electricity

Oil

OECDNon OECD

Fuel GrowthQuadrillion BTUs

Coal

Gas

Other

India & Africa

64

0

5

10

15

20

25

30

35

1990 2015 2040

Electricity Demand Continues to Surge

k TWhBy Sector

Transportation

Industrial

Residential/Commercial

0

50

100

150

200

250

300

1990 2015 2040

Quadrillion BTUsFuel Into Electricity Generation

Oil

Gas

Nuclear

Coal

Wind

Renewables

65

0

2

4

6

8

1990 2015 2040

0

2

4

6

8

1990 2015 20400

2

4

6

8

1990 2015 2040

k TWh

Gas

NuclearCoal

Wind

Other Renewables

Gas w/ CCS

Coal w/ CCS

Electricity Supply Varies Globally

United Statesk TWhChina

Oil

k TWhEurope

* Generation by Type66

0

10

20

30

40

1990 2015 2040

CO2 Emissions Plateau

Billion TonsBy Region

OECD

Rest of Non OECD

India & Africa

China

0

5

10

15

20

U.S. Europe China India

Tons per PersonEmissions per Capita

2010

2025

2040

67

0

20

40

60

80

100

120

2000 2010 2020 2030 2040

MBDOELiquids Supply

Liquids Supply Continues to Diversify

Conventional Crude and Condensate

Oil Sands

NGLs

Deepwater

Tight Oil

Biofuels

0

1

2

3

4

5

2040

Remaining Resource

Cumulative Production

TBOResource *

* Source: Total resource from IHS Inc. The use of this content was authorized in advance by IHS.

68

0

100

200

300

400

500

600

2000 2010 2020 2030 2040

Unconventional Gas Contribution Increases

BCFDProduction by Type

Unconventional

Conventional

0

100

200

300

400

500

600

2000 2010 2020 2030 2040

BCFDDemand by Region

North America

Middle East

AP Non OECD

Rest of OECD

Russia/Caspian

Rest of Non

OECD

69

0

20

40

60

80

100

Energy Use Evolves Over Time

PercentGlobal Percent Mix of Fuels

1800 1900 20001850 1950

Biomass

Coal

Oil

Gas

HydroNuclear

Other Renewables

Source: Smil, Energy Transitions (1800-1960)

2040

70

0

3

6

9

12

15

2000 2020 20400

3

6

9

12

15

2000 2020 2040

Technology Driven Supplies Expand Globally

MBDOEDeepwater by Region NGL by Region

MBDOE

North America

Russia-Caspian/Far East

Africa

Latin AmericaEurope

North America

Far East

Africa

Latin America

Russia/Caspian

EuropeMiddle East

71

1930s

1940s 1950s

1960s

1970s

1980s

1990s

2000s

0

20

40

60

80

100

1965 1970 1975 1980 1985 1990 1995 2000 2005 2010

Global Oil Production by Discovery Date

Discovered before 1930

MBDOE

Source: ExxonMobil estimates based on Wood Mackenzie Limited & Nehring Associates data72

North America*

Europe OECD

Asia Pacific

Latin America

Africa

Middle East

0

5

10

15

20

25

301000 TCF

Conventional

Unconventional

1.3

4.1

2.62.6

2.32.3

8.1

4.9

4.84.8

Global Gas Resource

Source: IEA; * Includes Europe Non OECD

•World: ~250 years coverage at current demand

•Large unconventional gains anticipated

World

Russia/Russia/Caspian*Caspian*

73

0

50

100

150

'10 '20 '30 '40

0

50

100

150

'10 '20 '30 '40

0

50

100

150

'10 '20 '30 '40

0

50

100

150

'10 '20 '30 '40

0

50

100

150

'10 '20 '30 '400

50

100

150

'10 '20 '30 '40

0

50

100

150

'10 '20 '30 '40

World Gas Supply

Europe

Asia Pacific

South America

North America

Africa

Russia/Caspian

Middle East

BCFD

Conventional

Unconventional

Pipeline

LNG

74

0

10

20

30

40

50

1990 2015 2040

0

10

20

30

40

50

1990 2015 2040

Transportation Fuel Demand Shifts to Diesel

MBDOEOECD

Gasoline

Ethanol

Diesel

Biodiesel

Jet Fuel

Fuel OilOther

MBDOENon OECD

75

Remaining Oil Resource - 2011 Conventional Crude and Condensate + Oil Sands and Tight Oil (BBO)

North America

Europe

~100

Asia Pacific

~75

Latin America

~100

Africa

~35

Russia/Caspian

~325

Middle East

~10

~250~125

~825~400

OPECNon-OPEC

~1,050~1,200

Oil Sands

Includes Undiscovered and Future Growth ResourceSources: USGS, Oil & Gas Journal, PIRA, IEA

76

77

Developed Countries

0%

20%

40%

60%

80%

100%

1990 2000 2010 2020 2030 2040 2050

Baseline Global action

EU

0%

20%

40%

60%

80%

100%

1990 2000 2010 2020 2030 2040 2050

Baseline Global action

Global Climate Reduction Plan

EU objective: 80 to 95% reductions largely through domestic measures:

around -80% internal reductions in 2050 compared to 1990

Developed Countries: similar efforts

Developing Countries: -5% compared to 1990 Equivalent to -

80% compared to business as usual

no cheap offsets by 2050

Developing Countries

0%

100%

200%

300%

400%

500%

1990 2000 2010 2020 2030 2040 2050

Baseline Global action

78

Global Climate Action and Converging Emissions Per Capita

79

The 2050 Targets

0

2

4

6

8

10

12

14

16

18

20

Wo

rld

OE

CD

no

n-O

EC

D

US

A

Jap

an

EU

-27

Afr

ica

Mid

dle

Ea

st

Ru

ssia

La

tin A

me

rica

Asi

a

Ch

ina

Ind

ia

20

50

"ta

rge

t"

Em

iss

ion

s, t

on

ne

s C

O2

pe

r p

ers

on

80

Pathways to 2050

0

50

100

150

200

250

300

350

400

450

$0 $20,000 $40,000 $60,000

GDP per capita, US$ 2000 (ppp)

En

erg

y p

er

ca

pit

a,

GJ

Improving energy efficiency

2025

2050

Falling CO2 emissions per unit of energy

2008

Wealthy developedDevelopedLeading developingDeveloping

81

Prospect of Emission Targets

0

50

100

150

200

250

300

350

$0 $10,000 $20,000 $30,000 $40,000

GDP per Capita, US$ ppp (2000)

En

erg

y p

er C

ap

ita

, GJ

Finland

Romania

“Developed” countries with Kyoto Targets“Developed” countries with Kyoto Targets

KoreaTaiwan

Singapore

China Thailand

Malaysia

Rapidly emerging economies in AsiaRapidly emerging economies in Asia

82

References

Hawksworth, J. et als. 2008. The World in 2050: Does the global financial crisis change the long-term outlook?.

Hawksworth, J. and Cookson, G.. 2008. The World in 2050: Beyond the BRICs: a broader look at emerging market growth prospects.

Hillebrand, E. 2007. The global Distribution of Income in 2050.

Nauman , Scott A. .2012. “The Outlook for Energy: A View to 2040.

Wilson, D. 2003. Dreaming with BRICs: The Path to 2050.

83

BRICS

84

• 2001:“Building Better Global Economic BRICs”. Paper by Jim O’Neil, from Goldman Sachs.

• 2003:“Dreaming with BRICs: the path to 2050”: written by Dominic Wilson and Roopa Purushothaman from Goldman Sachs. Paper about the evolution of global economy until 2050, proposes new category composed of the four major emerging economies.

The “BRICs” idea was immediately adopted by analysts and the media.

The growth of these countries would be the new building blocs – “bricks” – of the world economy by 2050.

Brazil, Russia, India and China were singled out due to their economic indicators and their potential, in relation to other developing countries.

Origin of the Title BRICs