Carbon Dioxide Emissions in the Short Run: The Rate and Sources of Economic Growth Matter

40 Pages Posted: 24 Apr 2015 Last revised: 27 Apr 2015

See all articles by Paul J. Burke

Paul J. Burke

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

Md Shahiduzzaman

University of Southern Queensland - Australian Centre for Sustainable Business and Development (ACSBD)

David I. Stern

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

Date Written: April 1, 2015

Abstract

This paper investigates the short-run effects of economic growth on carbon dioxide emissions from the combustion of fossil fuels and the manufacture of cement for 189 countries over the period 1961-2010. Contrary to what has previously been reported, we conclude that there is no strong evidence that the emissions-income elasticity is larger during individual years of economic expansion as compared to recession. Significant evidence of asymmetry emerges when effects over longer periods are considered. We find that economic growth tends to increase emissions not only in the same year, but also in subsequent years. Delayed effects – especially noticeable in the road transport sector – mean that emissions tend to grow more quickly after booms and more slowly after recessions. Emissions are more sensitive to fluctuations in industrial value-added than agricultural value-added, with services being an intermediate case. On the expenditure side, growth in consumption and in investment have similar implications for national emissions. External shocks have a relatively large emissions impact, and the short-run emissions-income elasticity does not appear to decline as incomes increase. Economic growth and emissions have been more tightly linked in fossil-fuel rich countries.

Keywords: Economic growth, emissions, pollution, business cycle, asymmetry, sector

JEL Classification: Q56, O44, E32

Suggested Citation

Burke, Paul J. and Shahiduzzaman, Md and Stern, David I., Carbon Dioxide Emissions in the Short Run: The Rate and Sources of Economic Growth Matter (April 1, 2015). CAMA Working Paper No. 12/2015, Available at SSRN: https://ssrn.com/abstract=2597902 or http://dx.doi.org/10.2139/ssrn.2597902

Paul J. Burke (Contact Author)

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

7 Liversidge Street
Lennox Crossing
Canberra, Australian Capital Territory ACT 0200
Australia

Md Shahiduzzaman

University of Southern Queensland - Australian Centre for Sustainable Business and Development (ACSBD) ( email )

Toowoomba, 4350
Australia

David I. Stern

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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