STOKING THE FIRES - CO2 EMISSIONS AND ECONOMIC-GROWTH

We examine the relationship between economic development and carbon dioxide emissions, a greenhouse gas central to global warming predictions. Estimates derived from global panel data suggest a diminishing marginal propensity to emit (MPE) carbon dioxide as GDP per capita rises. Despite this, global carbon dioxide emissions growth will continue at 1.8 percent per annum for the foreseeable future, a result that is not sensitive to average output growth. Instead, emissions growth continues because output and population will grow most rapidly in lower-income nations with high MPEs. This latter feature emphasizes the distributional consequences of policies to reduce emissions.