NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
loading...

Carbon Emissions and Business Cycles

Hashmat Khan, Christopher R. Knittel, Konstantinos Metaxoglou, Maya Papineau

NBER Working Paper No. 22294
Issued in May 2016
NBER Program(s):Environment and Energy Economics, Economic Fluctuations and Growth, Productivity, Innovation, and Entrepreneurship

U.S. carbon dioxide emissions are highly procyclical—they increase during expansions and fall during recessions. Given this empirical fact, we estimate the response of emissions to four prominent technology shocks from the business-cycle literature using structural vector autoregressive methodologies and data for 1973–2012. By studying the response of emissions to these shocks, we provide a novel approach to assess the shocks’ relevance as sources of aggregate output fluctuations. We find that emissions rise on impact only after an anticipated investment-specific technology shock; the response is statistically significant after the first quarter. The same shock explains most— roughly a third—of the total variation in emissions at a horizon of 5 years. Notably, emissions decrease on impact after an unanticipated neutral technology shock in a statistically significant way. This negative empirical response has the opposite sign from its theoretical counterpart in recent environmental DSGE (E-DSGE) models. Since the positive response of emissions drives the E-DSGE models’ recommendation for an optimal procyclical policy, our findings suggest that such a policy recommendation should be treated cautiously.

download in pdf format
   (406 K)

email paper

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w22294

Users who downloaded this paper also downloaded* these:
Fowlie, Reguant, and Ryan w18645 Market-Based Emissions Regulation and Industry Dynamics
Barreca, Clay, Deschenes, Greenstone, and Shapiro w18692 Adapting to Climate Change: The Remarkable Decline in the U.S. Temperature-Mortality Relationship over the 20th Century
Borenstein and Bushnell w21113 The U.S. Electricity Industry After 20 Years of Restructuring
Davis and Knittel w22925 Are Fuel Economy Standards Regressive?
Hausman and Kellogg w21115 Welfare and Distributional Implications of Shale Gas
 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us