An Alternative Reference Scenario for Global CO2Emissions from Fuel Consumption: An ARFIMA Approach

In this note, we establish an alternative reference scenario based on an ARFIMA estimated using global CO2 emissions from 1750 to 2013. These new reference forecasts are free from additional assumptions on demographic and economic variables, often used in most reference forecasts. Instead, we only rely on the properties of the underlying stochastic process for global CO2 emissions that are, in this sense, closer to fundamentals. Our reference forecasts are clearly below the levels proposed by other reference scenarios available in the literature. This is important, as it suggests that the ongoing policy goals are actually easier to reach than what is implied by the standard reference scenarios. Having lower and more realistic reference emissions projections gives a truer assessment of the policy efforts that are needed, and highlights the lower costs involved in mitigation efforts, thereby maximizing the likelihood of more widespread environmental policy efforts.