Exploring Nonlinearity on the CO2 Emissions, Economic Production and Energy Use Nexus: A Causal Discovery Approach

Abstract

We examine the interactions between growth in CO 2 emissions, economic production, and energy use at the global and multi-regional levels over the period 1990-2014. Methodologically, we use causal discovery that relies on linear and nonlinear tests of conditional independence to study their relationships. At the global scale, we show that energy use is unambiguously a nonlinear causal factor of economic output, making energy central in the economic and decarbonisation debate. At the multi-regional scale, causal discovery accurately identifies that three regions are driving global dynamics (East Asia and Pacific, Europe and Central Asia, and North America regions). Energy and climate policies in these regions will nonlinearly influence the degree of global CO 2 emission reduction rates and will impact the global economic dynamics. Our results further suggest that policy effectiveness could be gained if a country's climate actions were coordinated with the other geographies most affected by their consequences.