1. A Fresh Look at the Emissions-Income Nexus with Bayesian TVP Modeling
- Author
-
Collins, Ian
- Subjects
- Economics, Environmental Economics, Bayesian, Bayesian Statistics, Bayesian Modeling, Time Varying Parameter Model, Environment, Environmental Kuznets Curve, Decoupling, Emissions, Green Energy, Climate Change, Degrowth
- Abstract
Climate change is one of the most pervasive issues for society in the modern world. To successfully mitigate the devastating consequences of this phenomenon without sacrificing economic growth, the positive income-emissions nexus must be broken. In this paper, I asses the United States' progress along this dimension by investigating the time-varying effect of GDP on emissions from 1850-2018. I distinguish between the cyclical and trend relationship between income and emissions and utilize a Bayesian Time-Varying-Parameter (TVP) model to determine the effect of GDP on emissions over time. I find weak evidence that the United States follows the often-proposed Environmental Kuznets Curve (EKC) in the trend and base components of the nexus: the effect of GDP on emissions has significantly weakened over time but remains positive. Additionally, I present evidence that income and emissions have relatively decoupled for all components of the nexus, casting doubt on “degrowth” arguments, wherein this is only possible if economic growth slows. I find that since the 2000s, the long-run relationship of GDP and emissions has further decoupled, while the short-run relationship has intensified. I provide evidence that the United States’ increasingly green energy mix is a driver of this heterogeneity.
- Published
- 2024