3.2.1.2 Economic development

Economic activity is a dominant driver of energy demand and thus of greenhouse gas emissions. This activity is usually reported as gross domestic product (GDP), often measured in per-person (per-capita) terms. To derive meaningful comparisons over time, changes in price levels must be taken into account and corrected by reporting activities as constant prices taken from a base year. One way of reducing the effects of different base years employed across various studies is to report real growth rates for changes in economic output. Therefore, the focus below is on real growth rates rather than on absolute numbers.

Given that countries and regions use particular currencies, another difficulty arises in aggregating and comparing economic output across countries and world regions. There are two main approaches: using an observed market exchange rate (MER) in a fixed year or using a purchasing power parity rate (PPP) (see Box 3.1). GDP trajectories in the large majority of long-term scenarios in the literature are calibrated in MER. A few dozen scenarios exist that use PPP exchange rates, but most of them are shorter-term, generally running until the year 2030.