Stoking the Fires? Co2 Emissions and Economic Growth

40 Pages Posted: 4 Jul 2004 Last revised: 12 Aug 2022

See all articles by Douglas Holtz-Eakin

Douglas Holtz-Eakin

Syracuse University; National Bureau of Economic Research (NBER)

Thomas M. Selden

Agency for Healthcare Research and Quality (AHRQ)

Date Written: December 1992


Over the past decade, concern over potential global warming has focused attention on the emission of greenhouse gases into the atmosphere, and there is an active debate concerning the desirability of reducing emissions. At the heart of this debate is the future path of both greenhouse gas emissions and economic development among the nations. We use global panel data to estimate the relationship between per capita income and carbon dioxide emissions, and then use the estimated trajectories to forecast global emissions of CO2. The analysis yields four major results. First, the evidence suggests a diminishing marginal propensity to emit (MPE) CO2 as economies develop; a result masked in analyses that rely on cross-section data alone. Second, despite the diminishing MPE, our forecasts indicate that global emissions of CO2 will continue to grow at an annual rate of 1.8 percent. Third, continued growth stems from the fact that economic and population growth will be most rapid in the lower-income nations that have the highest MPE. For this reason, there will be an inevitable tension between policies to control greenhouse gas emissions and those toward the global distribution of income. Finally, our sensitivity analyses suggest that the pace of economic development does not dramatically alter the future annual or cumulative flow of CO2 emissions.

Suggested Citation

Holtz-Eakin, Douglas and Selden, Thomas M., Stoking the Fires? Co2 Emissions and Economic Growth (December 1992). NBER Working Paper No. w4248, Available at SSRN:

Douglas Holtz-Eakin (Contact Author)

Syracuse University ( email )

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National Bureau of Economic Research (NBER)

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Thomas M. Selden

Agency for Healthcare Research and Quality (AHRQ) ( email )

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United States
301-427-1677 (Phone)

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