Can emission reduce while economic growth continues?

Economic growth is considered as a most important driver of anthropogenic CO2 emissions, which is central to global climate change and its widespread impacts on human and natural systems. International commitments to reducing... [ view full abstract ]

Economic growth is considered as a most important driver of anthropogenic CO₂ emissions, which is central to global climate change and its widespread impacts on human and natural systems. International commitments to reducing CO₂ emissions have been long impeded by the perceived tradeoffs between regional economic development and emission mitigation. However, it remains poorly understood if countries can reduce CO₂ emissions as their economies continue to grow. Here we explores the question by identifying, across a large number of countries in a globalizing word, the historical pathways and the underlying driving forces that led to declining CO₂ emission in a growing economy. Our analysis improves upon the literature in three key aspects. First, our analysis presents cross-country empirics that are relevant to individual countries. Using an annual time-series of CO₂ emission and GDP for a large estimation sample (140 countries, 1970-2013), we analyze individual countries’ CO₂-GDP pathways for the 1970s, 1980s, 1990s, and 2000-2013, respectively.  This is distinguished from most existing empirical results that characterize the average country pattern. Second, in addition to the territorial emission, we consider the consumption-based CO₂ emission while analyzing the CO₂-GDP pathways. Three, our analytical approach avoids several time-series cross-section issues that are important for reliable empirical analysis but are often neglected: nonstationarity, cross-sectional dependence, endogeneity, and cross-country heterogeneity in the impact of observables and unobservables. Our statistical analysis of the CO₂-GDP elasticity accounts for: (1) time-invariant heterogeneity across countries, such as geography or culture; (2) the heterogeneous and time-variant impacts that common contemporaneous shocks (e.g. global price changes or technology innovations) have on each country; and (3) the country-specific and varying effects of GDP growths on CO₂ emissions. 

Our analyses suggest there is historical evidence that countries reduced their CO₂ impacts, from both the territorial and consumption-based perspectives, as their economic development continued.  However, the desired evidence is quite limited in number, especially when consumption-based CO₂ emissions are accounted. Our macro-level results can improve integrated assessment models, emission scenarios, and projections of future emissions, in which regional CO₂-GDP elasticity represents a core driving force of anthropogenic CO₂ emissions. More broadly, our analysis contributes to the fundamental exploration concerning humanity’s ability to develop economically while still preserving the environment