International Cooperation to Avert Global Warming: Economic Growth, Carbon Pricing, and Energy Efficiency

Abstract

This paper develops a global simulation model linking economicgrowth, population growth, and fossil fuel carbon dioxide emissions. The equations of the model are estimated from historical data on a sample covering most of the countries of the world. The estimated relationships show that while increased economic output tends to be associated with higher CO2 emissions, a rising standard of living also slows down population growth and leads to reduced energy consumption per unit of output. The implication is that, under "business as usual" scenarios, the increase in carbon dioxide emissions is relatively insensitive to rates of economic growth over the medium term (50-70 years). This result suggests that promotion of economic growth in the developing world is likely to be the most effective policy for combatting global warming, because the increased wealth that a pro-growth policy will produce will make it easier for the world to improve energy efficiency and reduce dependence on fossil fuels.