Macroeconomic Carbon Correlations: Methods and Empirical Evidence

Given the obvious connection between physical production and energy use, on the one hand, and the dominance of fossil fuels in the energy mix world-wide on the other, it would not be surprising if there were a strong correlation between a country's carbon dioxide emissions and its national income.

What is surprising is that, while there has been a lot of misuse of alleged correlations – usually in terms of 'carbon elasticities' or 'carbon intensities' – often for political reasons, the economic research community has so-far failed to make any significant contribution to this issue.

There have been a considerable number of peer reviewed econometrics papers investigating the possibility of an inverted u-shape (Kuznets-type) relation between (per capita) national income and (per capita) CO2 emissions. However, all papers that have claimed to have found such a correlation were subsequently found to be statistically flawed for one reason or another.

This research, a collaborative effort with modelers and econometricians from the Department of Economics at the University of Berne/Switzerland, considers the methodological problems and possible solutions to these issues.

Research contact Benito Müller

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