Long-run projections of environmental impact in the OECD: the importance of uncertainty and age structure

This paper considers the influence of uncertainty with respect to GDP and population total and age structure on long-run environmental impact projections. A simple model, based on the stochastic version of the IPAT equation, is used to generate projections of two environmental impacts for which population has a demonstrated influence carbon emissions from transport and residential electricity consumption. The paper examines the sensitivity of those long-run projections to uncertainty regarding possible future GDP and population growth/change. The following are demonstrated: 1) if the medium path for either population or GDP is to be believed/trusted, then uncertainty with respect to the growth/change of the other factor is unimportant; 2) uncertainty with respect to population projections has a greater effect on environmental impact projections than does uncertainty with respect to GDP projections despite that the degree of uncertainty associated with population is smaller than the uncertainty associated with aggregate economic growth.