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Emissions-GDP Relationship in Times of Growth and Decline

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  • Baran Doda

Abstract

This empirical paper focuses on the relationship between changes in GDP and CO2 emissions as a country�s economy moves through periods of growth and decline. Using a comprehensive panel, I document substantial heterogeneity in the relationship across countries. Specifically, countries can be classi?ed into one of the following three groups. Group D (for decline) includes countries where the emissions growth rate is more strongly associated with the GDP growth rate in periods of GDP decline than in periods of GDP growth. Group G (for growth) includes countries where the degree of association is stronger in periods of GDPgrowth. Finally, in group S (for symmetrical) it is not possible to reject the hypothesis that the relationship is the same for growth and decline. According to a simple count criterion, approximately a third of the countries in the sample fall into each group. Notably, China and the US, currently the world�s largest emitters by a substantial margin, are in group D. These results have potentially important consequences for long-term emissions projections. They also suggest that macroeconomic stabilization policies may have adverse emissions consequences by limiting the cleansing e?ect of periods in which GDP declines.

Suggested Citation

  • Baran Doda, 2013. "Emissions-GDP Relationship in Times of Growth and Decline," GRI Working Papers 116, Grantham Research Institute on Climate Change and the Environment.
  • Handle: RePEc:lsg:lsgwps:wp116
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    File URL: http://www.lse.ac.uk/GranthamInstitute/wp-content/uploads/2014/02/WP116-emissions-gdp-growth-and-decline.pdf
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    References listed on IDEAS

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    1. Fischer, Carolyn & Springborn, Michael, 2011. "Emissions targets and the real business cycle: Intensity targets versus caps or taxes," Journal of Environmental Economics and Management, Elsevier, vol. 62(3), pages 352-366.
    2. Daniel Hoechle, 2007. "Robust standard errors for panel regressions with cross-sectional dependence," Stata Journal, StataCorp LP, vol. 7(3), pages 281-312, September.
    3. Garth Heutel, 2012. "How Should Environmental Policy Respond to Business Cycles? Optimal Policy under Persistent Productivity Shocks," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 15(2), pages 244-264, April.
    4. Garth Heutel, 2012. "How Should Environmental Policy Respond to Business Cycles? Optimal Policy under Persistent Productivity Shocks," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 15(2), pages 244-264, April.
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    Cited by:

    1. Sheldon, Tamara L., 2017. "Asymmetric effects of the business cycle on carbon dioxide emissions," Energy Economics, Elsevier, vol. 61(C), pages 289-297.

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