Co-Fluctuation Patterns of Per Capita Carbon Dioxide Emissions: The Role of Energy Markets

Abstract

This paper applies principal component analysis to investigate the linkages, or dominant co-fluctuation patterns, of per capita carbon dioxide emissions across countries for the time period 1950-2000. Energy resource world markets are investigated as an offsetting mechanism possibly coordinating emission fluctuations between countries. The results of the analysis provide evidence that world energy resource markets are acting as a coordinating mechanism for emission fluctuations in most cases. The results also suggest that until recently the dominant emission co-fluctuation pattern for developed countries differs from the dominant emission co-fluctuation pattern for developing countries. The common fluctuation pattern found in the 1984-2000 time period suggests that an offsetting mechanism does exist and will help contain global per capita emissions into the future. The strong degree that emissions are linked between countries and energy markets acting as an offsetting mechanism suggest that to be successful a global agreement to address climate change must require emission reductions by all major emitters, not just the developed countries.

Keywords: principal component analysis, carbon dioxide emissions, climate change, energy markets

JEL Classification: Q54, Q56, Q43