Economic growth, GHG emission reduction, and the Kuznet’s Curve

Three years ago, I did my master’s thesis examining the causal relationship
between energy consumption, economic growth, and CO2 emissions in the Philippines.

Employing the Toda and Yamamoto procedure to test the causality between the variables, I found that the country’s economic growth may help reduce CO2 emissions in the long run. However, CO2 reduction may counteract economic growth as the Philippines mainly rely on fossil fuels. The country can also implement energy conservation policies without limiting its economic growth. At the same time, it can increase its energy consumption without increasing CO2 emissions by adopting cleaner energy resource options.

(See my entire paper here, published on IEEE Conference Proceeding.)

In the case of rich countries, they “managed to achieve economic growth while reducing emissions.”

From Many countries have decoupled economic growth from CO₂ emissions, even if we take offshored production into account:

More countries have managed to decouple more recently. Emissions in the US, for example, increased substantially in the 1990s. This means that its emissions today are still higher than in 1990. But if we look at the change since 2000 [you can do this by adjusting the time-slider on the bottom of the chart] we see a large drop in emissions alongside a rise in GDP. It’s only over the last 20 years that this decoupling has started to happen.

There are two key reasons why emissions have fallen in these countries. First, some countries have managed to decouple energy use and economic growth. GDP has increased while total energy use has remained flat, or even fallen. But the second is the most important: countries are replacing fossil fuels with low-carbon energy. We can produce more energy, without the emissions that used to come with it.

But do you think that the rich countries reduced their emissions by exporting them overseas?

From Many countries have decoupled economic growth from CO₂ emissions, even if we take offshored production into account:

It would be wrong to assume that this reduction in emissions in rich countries was only achieved by offshoring production overseas – by transferring emissions to manufacturing economies such as China and India. In the chart we see that consumption-based emissions – which adjust for emissions from goods that are imported or exported – have also fallen. Some emissions have been exported overseas, but this is not the only driver of this decline.

These countries show that economic growth is not incompatible with reducing emissions.

A key question is whether we can decarbonize fast enough, and across more countries. The continued decline in the cost of low-carbon technologies makes this acceleration more realistic every day.