The economy and greenhouse gas reduction

A weekly presentation of downloadable charts and short analyses designed to graphically illustrate important economic issues. Updated every Wednesday.

Snapshot for July 12, 2000

The economy and greenhouse gas reduction
Scientists agree that emissions of "greenhouse gases" pose a serious threat to the global climate. Carbon, the most important of these gases, is a direct byproduct of fossil fuel use. When the United States tentatively agreed in December 1997 to reduce greenhouse gas emissions 7% below 1990 levels by 2010, many worried that such a reduction in carbon emissions would require drastic cutbacks in energy use and thus wreak havoc on the U.S. economy.

Historically, economic output and carbon emissions have gone hand in hand, but recently this link has begun to weaken.

The chart below shows the relationship between carbon emissions and gross domestic product (GDP) from the end of the last oil shortage in 1986 to the present, indexed to 1986 levels. As the graph shows, the link between carbon emissions and GDP first began to weaken in the early 1990s, and this has continued to deteriorate over the course of the decade. Preliminary estimates released by the U. S. Department of Energy this month show this trend continuing, with economic growth at over 4% for 1999 and carbon emissions growth of just over 1%.

The reason for this new trend is not yet clear. Some have claimed that warmer winters in recent years have reduced heating requirements and, consequently, carbon emissions. This implies that the new trend is due to weather anomalies, as opposed to progress in energy efficiency, and that a return to more normal weather would negate the new trend. Data from the Department of Labor shows, however, that if 1999 had exactly the same weather as 1998, carbon emissions would have actually declined by a small amount.

Whatever other factors are behind this new trend, the last few years have clearly demonstrated that slowing carbon emissions -- and preserving the environment in the process -- does not have to come at the expense of a vibrant economy.

Check out the archive for past Economic Snapshots.