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What Can We Learn About Carbon-reducing Innovations From the Joint Dynamics of CO2 Emissions and GDP?

Author

Listed:
  • Soojin Jo
  • Lilia Karnizova

Abstract

Technological innovations targeting energy efficiency, carbon storage, and clean energy are often promoted as solutions to reduce emissions without sacrificing economic growth. However, theoretical studies offer conflicting views on the feasibility of this approach, and empirical assessments at the aggregate level are sparse. This paper contributes new evidence on the macroeconomic implications of carbon-reducing technological innovations. We analyze the joint dynamics of U.S. per capita emissions and GDP and identify a novel shock that lowers emissions without reducing economic output. This statistical shock is uncorrelated with past macroeconomic variables, energy prices, estimates of the leading macroeconomic shocks, and measures of environmental policy stringency. Our novel shock exhibits characteristics of an energy demand-reducing shock specific to the U.S. energy market, with pronounced effects concentrated in the residential and commercial sectors. This shock appears to be linked to improvements in energy efficiency, possibly stemming from changes in energy requirements for homes and buildings. These improvements may result from energy policies, occur exogenously, or reflect shifts in preferences for energy conservation. JEL Classification: E32, Q43, Q50, Q55

Suggested Citation

  • Soojin Jo & Lilia Karnizova, 2025. "What Can We Learn About Carbon-reducing Innovations From the Joint Dynamics of CO2 Emissions and GDP?," The Energy Journal, , vol. 46(4), pages 117-146, July.
    • Handle: RePEc:sae:enejou:v:46:y:2025:i:4:p:117-146
    DOI: 10.1177/01956574251322722
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General
    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation

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