Emanuel Mönch (Frankfurt School of Finance & Management) – Carbon Intensity, Productivity, and Growth

While the U.S. economy is still far from net zero, the carbon emission intensity of U.S. output has experienced a secular decline over the past several decades. In this paper, we seek to understand the driving forces behind this reduction. We identify an emission intensity shock as the innovation which explains the maximum share of variation in the ratio of per capita CO2 emissions and real GDP at long horizons. While the shock is associated with a persistent decline of emissions per unit of output, it only has a short-lived effect on emissions. The reason is that output and its components strongly increase in response to the emission intensity shock, providing evidence of a pronounced rebound effect in aggregate U.S. carbon emissions. The reduced emission intensity is driven by a substitution of fossil fuels with electricity that historically was mainly generated from nuclear energy. Separately identified shocks capturing news about total factor productivity and news about green technologies obtained from patent data are highly correlated with the emission intensity shock and give rise to essentially identical dynamics of output and emissions. Hence, while new technologies affecting the energy mix of the U.S. economy have been a key driver of growth in recent decades, they have not permanently reduced emissions.

Datum:
Friday, January 20, 2023 um 11:00 a. m.

Ort:
Oesterreichische Nationalbank
Otto-Wagner-Platz 3, 1090 Wien
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