Reassessing the Links between GHG Emissions, Economic Growth, and the UNFCCC: A Difference-in-Differences Approach

Abstract

International climate agreements such as the Kyoto Protocol of 1997 and, more recently, the Paris Climate Agreement are fragile because, at a national level, political constituencies’ value systems may conflict with the goal of reducing greenhouse gas (GHG) emissions to sustainable levels. Proponents cite climate change as the most pressing challenge of our time, contending that international cooperation will play an essential role in addressing this challenge. Political opponents argue that the disproportionate requirements on developed nations to shoulder the financial burden will inhibit their economic growth. We find empirical evidence that both arguments are likely to be correct. We use standard regression techniques to analyze a multi-country dataset of GHG emissions, GDP per capita growth, and other factors. We estimate that after the Kyoto Protocol (KP) entered into force ‘Annex I’ countries reduced GHG emissions on average by roughly 1 million metric tons of CO2 equivalent (MTCO2e), relative to non-Annex I countries. However, our estimates reveal that these countries also experienced an average reduction in GDP per capita growth rates of around 1–2 percentage points relative to non-Annex I countries.