Crises and Emissions: New Empirical Evidence from a Large Sample

In this paper, we empirically assess by means of the local projection method, the impact of different types of financial crises on a variety of pollutant emissions categories for a sample of 86 countries between 1980-2012. We find that financial crises in general lead to a fall in CO2 and methane emissions. When hit by a debt crisis, a country experiences a rise in emissions stemming from either energy related activities or industrial processes. During periods of slack, financial crises in general had a positive impact on both methane and nitrous oxide emissions. If a financial crisis hit an economy when it was engaging in contractionary fiscal policies, this led to a negative response of CO2 and production-based emissions.