The Organisation for Economic Co-operation and Development (OECD) released updated long-term scenarios last week quantifying the macroeconomic impacts of climate change mitigation and the resulting economic damage, according to a blog post published September 8, 2025. The analysis projects a gradual moderation of global annual potential output growth even under scenarios continuing current trends in decarbonization and energy efficiency.
The OECD’s scenarios consider two “business-as-usual” paths, differing based on the severity of projected climate damage. The first scenario utilizes a median climate damage curve, while the second employs a high climate damage curve, reflecting the range of potential impacts identified in scientific literature. Under the median damage scenario (BAU1), global annual potential output growth is forecast to decline from approximately 2.9% currently to 2.7% in the early 2030s, further decreasing to 2.1% in the early 2040s, and stabilizing around 1.3% in the latter half of the century.
This projected slowdown is attributed to declining working-age population growth and decelerating trend labor efficiency growth in emerging-market economies as their productivity converges with more developed nations. The OECD projects China will remain the world’s largest economy until the mid-2060s, when India is expected to surpass it. Global annual potential output per capita growth is also expected to slow, falling from about 2% today to 1.25% by 2050, with limited further change anticipated.
A separate report from the OECD and the United Nations Development Programme (UNDP), released in March 2025, challenges the long-held belief that cutting emissions would harm national economies. That research indicates strong climate action could result in a net gain of 0.23 percent to global GDP by 2040, with even greater growth projected by 2050. The benefits are expected to be particularly pronounced in lower-income nations, potentially lifting 175 million people out of poverty by 2030.
Despite these findings, the OECD report notes governments worldwide remain hesitant to implement large-scale climate policies, citing economic concerns. Although, the OECD-UNDP analysis warns that delaying climate action could lead to irreversible economic downturns and, in some regions, permanent recession. Achim Steiner, executive secretary of the UNDP, stated during the Europe 2025 Conference in Berlin that investing in climate transitions does not necessarily lead to economic regression, and may even result in modest GDP growth that expands over time.
Research published in Environmental Science and Pollution Research International in October 2023 emphasizes the importance of environmental policy and energy transitions in addressing the climate crisis and strengthening resilience in OECD countries. The OECD continues to advocate for bolder action and deeper global cooperation to achieve net-zero emissions and address the interconnected challenges of climate change, biodiversity loss, and pollution.
The OECD has not yet released a statement responding to concerns that geopolitical tensions, public debt, and economic uncertainty are hindering commitments to climate policies, as noted in the March 2025 report.
