Economic Growth and Carbon Emissions: The Road to ‘Hothouse Earth’ is Paved with Good Intentions

39 Pages Posted: 26 Dec 2018

See all articles by Servaas Storm

Servaas Storm

Delft University of Technology - Department of Economics

Enno Schröder

Delft University of Technology - Faculty of Technology, Policy and Management

Date Written: November 2018

Abstract

All IPCC (2018) pathways to restrict future global warming to 1.5°C (and well below an already dangerous 2°C) involve radical cuts in global carbon emissions. Such de-carbonization, while being technically feasible, may impose a ‘limit’ or ‘planetary boundary’ to growth, depending on whether or not human society can decouple economic growth from carbon emissions. Decoupling is regarded viable in global and national policy discourses on the Paris Agreement—and claimed to be already happening in real time: witness the recent declines in territorial CO2 emissions in a group of more than 20 economies. However, some scholars argue that radical de-carbonization will not be possible while increasing the size of the economy. This paper contributes to this debate as well as to the larger literature on climate change and sustainability. First, we develop a prognosis of climate-constrained global growth for 2014-2050 using the Kaya sum rule. Second, we use the Carbon-Kuznets-Curve (CKC) framework to empirically assess the effect of economic growth on CO2 emissions using measures of both territorial (production-based) emissions and consumption-based (trade- adjusted) emissions. We run panel data regressions using OECD ICIO CO2 emissions data for 61 countries during 1995-2011; to check the robustness of our findings we construct and use panel samples sourced from alternative databases (Eora; Exio; and WIOD). Even if we find evidence suggesting a decoupling of production-based CO2 emissions and growth, consumption-based CO2 emissions are monotonically increasing with per capita GDP (within our sample). We draw out the implications of these findings for climate policy and binding emission reduction obligations.

Keywords: Carbon Kuznets Curve; Climate change; Economic growth; Production-based CO2 emissions, Consumption-based CO2 emissions; Decoupling; Kaya Identity; Paris Agreement

JEL Classification: F64; Q54; Q55; Q56

Suggested Citation

Storm, Servaas and Schröder, Enno, Economic Growth and Carbon Emissions: The Road to ‘Hothouse Earth’ is Paved with Good Intentions (November 2018). Institute for New Economic Thinking Working Paper Series No. 84. Available at SSRN: https://ssrn.com/abstract=3306271 or http://dx.doi.org/10.2139/ssrn.3306271

Servaas Storm

Delft University of Technology - Department of Economics ( email )

Jaffalaan 5
2628 EB Delft
Netherlands
31-15-2783548 (Phone)
31-15-2783480 (Fax)

Enno Schröder (Contact Author)

Delft University of Technology - Faculty of Technology, Policy and Management ( email )

Jaffalaan 5
Delft, 2628BX
Netherlands

Register to save articles to
your library

Register

Paper statistics

Downloads
82
Abstract Views
448
rank
307,480
PlumX Metrics