Asymmetric response of carbon emissions to recessions and expansions and oil market shocks

29 Pages Posted: 2 Nov 2021

See all articles by Xueting Jiang

Xueting Jiang

affiliation not provided to SSRN

David I. Stern

Australian National University (ANU) - Crawford School of Public Policy

Date Written: October 26, 2021

Abstract

The 2020 COVID-19 driven recession saw a sharp drop in carbon dioxide emissions as transportation and some other energy uses were curtailed. This was an unusual recession as it was driven by a pandemic. Previous research shows that when GDP declines carbon emissions fall faster relative to GDP than they rise in economic booms. Using monthly US data, we examine each individual recession in the US since 1973 finding that there is an asymmetric response in the 1973-5, 1980, 1990, and 2020 recessions but not in the 1981-2, 2001, or 2008-9 recessions. The former four recessions are associated with negative oil market shocks. In the first three there was a supply shock and in 2020 a demand shock. Changes in oil consumption that are not explained by changes in GDP explain these asymmetries. Furthermore, the asymmetries are due to emissions in the transport and industrial sectors, which are the main consumers of oil.

Keywords: COVID-19, climate change, business cycle

JEL Classification: Q43, Q54

Suggested Citation

Jiang, Xueting and Stern, David I., Asymmetric response of carbon emissions to recessions and expansions and oil market shocks (October 26, 2021). CAMA Working Paper No. 92/2021, Available at SSRN: https://ssrn.com/abstract=3950024 or http://dx.doi.org/10.2139/ssrn.3950024

Xueting Jiang

affiliation not provided to SSRN

David I. Stern (Contact Author)

Australian National University (ANU) - Crawford School of Public Policy ( email )

ANU College of Asia and the Pacific
J.G. Crawford Building, #132, Lennox Crossing
Canberra, Australian Capital Territory 0200
Australia

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