Working Paper

Carbon Emissions and Economic Growth: Production-based versus Consumption-based Evidence on Decoupling

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We assess the Carbon-Kuznets-Curve hypothesis using internationally consistent and comparable production-based versus consumption-based CO2 emissions data for 40 countries (and 35 industries) during 1995-2007 from the World Input Output Database (WIOD).

The estimates for per capita CO2 emissions are truly comprehensive as these include all carbon emissions embodied in international trade and global commodity chains. Even if we find evidence suggesting a decoupling of production-based CO2 emissions and growth, consumption- based CO2 emissions are monotonically increasing with per capita GDP. We draw out the implications of these findings for climate policy and binding emission reduction obligations.