Emissions and Growth: Trends and Cycles in a Globalized World
The extent of decoupling between greenhouse gas emissions and real GDP provide mixed evidence and have generated debate
Abstract
Recent discussions of the extent of decoupling between greenhouse gas (GHG) emissions and real gross domestic product (GDP) provide mixed evidence and have generated much debate. They show that to get a clear picture of decoupling it is important to distinguish cycles from trends: there is an Environmental Okun鈥檚 Law (a cyclical relationship between emissions and real GDP) that often obscures the trend relationship between emissions and real GDP. The authors show that, once the cyclical relationship is accounted for, the trends show evidence of decoupling in richer nations鈥攑articularly in European countries, but not yet in emerging markets. The picture changes somewhat, however, if they take into consideration the effects of international trade, that is, if they distinguish between production-based and consumption-based emissions. Once they add in their net emission transfers, the evidence for decoupling among the richer countries gets weaker. The good news is that countries with underlying policy frameworks more supportive of renewable energy and supportive of climate change tend to have greater decoupling between trend emissions and trend GDP, and for both production- and consumption-based emissions.
This work is part of the 鈥楳acroeconomics in Low-income countries鈥� programme
Citation
Gail Cohen, Jo茫o Tovar Jalles, Prakash Loungani, Ricardo Marto (2017) Emissions and Growth: Trends and Cycles in a Globalized World. IMF Working Paper No. 17/191