Growth, coal and carbon emissions: economic overheating and climate change

Emanuel Kohlscheen, Richhild Moessner and Előd Takáts in this BIS research:

We use a comprehensive database of 121 countries over the 1971-2016 period to study how macroeconomic factors drive carbon (carbon-dioxide) emissions. For this purpose, dynamic panel regressions are estimated. Carbon emissions rise with economic development, manufacturing activity, urbanization and increasingly with economic growth. In electricity generation, the use of coal, and to a lesser degree of oil, is associated with higher carbon emissions, while renewable energy use is already associated with lower national emissions in advanced economies. We also uncover a non-linearity: economic overheating is particularly harmful when coal use is more intensive. The results suggest that mitigating economic cycles might also reduce carbon emissions.

The findings are policy relevant. Our linear models results provide broad support for structural policies aimed at greening the energy mix. They clearly highlight the very negative role of coal, and to a lesser extent of oil – and the positive impact of renewable energy sources. Here,
our new finding that the sensitivity of carbon emissions to growth is increasing seems particularly relevant. Our non-linear results are particularly relevant for cyclical economic policies. In particular, central banks might find it relevant that economic stabilisation, which is within most central bank mandates, could also mitigate carbon emissions, and thereby lessen the risks of climate change. 

One Response to “Growth, coal and carbon emissions: economic overheating and climate change”

  1. Ramon Says:

    So cool
    Good work

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