We analyze the short-term and the long-term determinants of energy intensity, carbon intensity and scale effects for eight developed economies and two emerging economies from 1973 to 2007. Our ...results show that there is a difference between the short-term and the long-term results and that climate policy are more likely to affect emission over the long-term than over the short-term. Climate policies should therefore be aimed at a time horizon of at least 8 years and year-on-year changes in emissions contains little information about the trend path of emissions. In the long-run capital accumulation is the main driver of emissions. Productivity growth reduces the energy intensity while the real oil price reduces both the energy intensity and the carbon intensity. The real oil price effect suggests that a global carbon tax is an important policy tool to reduce emissions, but our results also suggest that a carbon tax is likely to be insufficient decouple emission from economic growth. Such a decoupling is likely to require a structural transformation of the economy. The key policy challenge is thus to build new economic structures where investments in green technologies are more profitable.
•We model determinants of scale, energy intensity and carbon intensity.•Using band spectrum regressions, we separate between short and long run effects.•Different economic variables affect emission in the short and long run.•CO2 reducing policies should have a long run horizon of (at least 8 years).•A low carbon society requires a structural transformation of the economy.
Hong and Kao (2004) proposed a class of general applicable wavelet-based tests for serial correlation of unknown form in the residuals from a panel regression model. The tests can be applied to both ...static and dynamic panel models. Their test, however, is computationally difficult to implement, and simulation studies show that the test has poor small-sample properties. In this paper, we extend Gençay’s (2010) time-series test for serial correlation to panel data case. Our new test is also wavelet based and maintains the advantages of the Hong and Kao (2004) test, but it is much simpler and easier to implement. Furthermore, simulation results show that our test has quicker convergence rate and hence better small-sample properties, compared to Hong and Kao (2004) test. We also compare our test with several other existing tests for series correlation, and our test has in general better statistical properties in terms of both size and power.
In China, a large private sector has evolved alongside a still sizeable state-owned sector that is subject to government control. Several studies have found that in this mixed economy, the private ...sector is economically more efficient than the state-owned sector. In this paper, we investigate whether private firms are also more carbon efficient than state-owned firms. Using a macroeconomic panel data model with provincial data from 1992 to 2010, we confirm that private firms emit less carbon dioxide than state-owned firms. Our results imply that future reforms, such as ongoing privatization, introduced to increase the economic efficiency of state-owned companies will also mitigate emissions growth. The policy lesson, not only for China but for developing countries maintaining a large state-owned sector, is that economic efficiency and energy efficiency are conjoined mutual benefits.
•We test if China's private firms are more carbon efficient than state-owned firms.•We show that private firms are the most carbon efficient firms in China's economy.•With no state firms, CO2 emission growth would be 2% points smaller p.a.•Market reforms of the state-owned sector can reduce emissions growth.
The carbon dioxide embodied in Chinese exports to developed countries increased rapidly from 1995 to 2008. We test the extent to which institutional reforms in China can explain this increase. We ...focus on five areas of reforms: trade liberalization, environmental institutions, legal and property rights, institutional risk and exchange rate policy. Our results show that trade liberalization, weak environmental institutions, exchange rate policy, and legal and property rights affect emissions. Our results also indicate that the lack of reform in the utilities sector is an important factor in the rapid increase in embodied emissions.
•Carbon emissions embodied in foreign trade has increased.•We test to what degree Chinese institutional reforms can explain this increase.•We find that trade liberalization is the key reform driving emissions.•Environmental institutions & exchange rate policy also have an effect on emissions.
Abstract How macroeconomic crises affect firms' environmental sustainability strategies is an open question. We study the impact of the Covid‐19 pandemic on the environmental sustainability ...strategies of firms listed on the OMXNasdaq stock exchange in Sweden. The analysis is based on a survey distributed twice, once during the summer of 2020 and once during the summer of 2021 with detailed questions related to the firms' environmental strategies. We find that most firms view the pandemic as an opportunity to strengthen their environmental strategies. However, we also find that the economic downturn caused most firms to redirect scarce resources away from environmental sustainability. We also find that firms which had adopted the Taskforce on Climate‐Related Financial Disclosures were less likely to divert resources. These short‐term results indicate that the pandemic will not enhance firms' environmental sustainability practices in the future.
We study the mapping and reporting of climate-related risks among firms listed on the NasdaqOMX stock exchange in Stockholm in four goods-producing industries. Our study contains two parts: (i) a ...study of the firms' external communication through their annual reports, sustainability reports and webpages, and (ii) a follow-up survey of the top management team. The survey contains quantitative questions and free text answers, which provide additional insights into the mapping and risk-handling of climate-related risks among the firms. We find that firms are likely to engage in some form of mapping and reporting of climate-related risks, but there are variations among the firms. Furthermore, the management of climate-related risks appears to be a residual issue for most firms with little active engagement from the management team or board of directors.
Key policy insights
Public policies and private initiatives, such as the EU's Non-Financial Reporting Directive/Corporate Sustainability Reporting Directive (NFRD/CSRD), the EU Taxonomy for Sustainable Activities, and Task Force on Climate-related Financial Disclosure (TCFD), may redirect and accelerate investments promoting a low-carbon and climate-resilient economy.
Although most firms map and report climate-related risks, the understanding of the nature of these risks, of underlying problems, and of what a climate transition implies, varies across firms and industries.
The success of the EU's NFRD/CSRD, the EU Taxonomy for Sustainable Activities, and TCFD requires an improved understanding of climate-related risks among the firms and a more proactive engagement of the management team.
Policymakers must provide firms with additional guidance aimed at improving their understanding of climate-related risks and thus their capacity to manage these risks.
Firms need to, individually and jointly, revise their theoretical and empirical understandings of climate-risk management and especially the role climate-related risks play in the new policy setting.
The TCFD has an important role to play, but as a voluntary initiative, it is insufficient to generate change among all firms.
This paper explores the link between income, and wealth inequality and the ecological footprint in France, Netherlands, United States, and United Kingdom from 1962 to 2021. Based on theoretical ...considerations, we allow the relationship to vary over time. Our analysis provides some support for income inequality influencing ecological footprints, specifically through carbon emissions. Yet, we do not observe a significant effect on non‑carbon footprints. Notably, the link between income inequality and carbon emissions shifted from negative in the 1960s to positive from the late 1980s onwards. Over all our findings imply that economic inequality's impact on the environment is likely limited and context dependent.
•We test the relationship between economic inequality and the ecological footprint.•The results indicate a weak relationship that varies over time.•Inequality only affects the carbon footprint and not the non‑carbon footprint.•Changes in consumption patterns may partially explain the time varying effects.
This paper studies the relationship between income inequality and carbon emissions in the United States between 1929 and 2019. We contribute to the literature by studying if and how the relationship ...has varied over time. To this end we estimate a band spectrum regression model and a smooth-varying coefficients model. Our results show that higher inequality was associated with lower emissions during the early part of the sample and higher emissions towards the end of the sample.
•Whether the level of inequality affects carbon dioxide emssions is unclear.•We test the association between income inequalty and carbon dioxide emissions.•We find that the relationship varies over time.•Changes in consumption patterns may partially explain the time varying effects.
The target of zero emissions sets a new standard for industry and industrial policy. Industrial policy in the twenty-first century must aim to achieve zero emissions in the energy and emissions ...intensive industries. Sectors such as steel, cement, and chemicals have so far largely been sheltered from the effects of climate policy. A major shift is needed, from contemporary industrial policy that mainly protects industry to policy strategies that transform the industry. For this purpose, we draw on a wide range of literatures including engineering, economics, policy, governance, and innovation studies to propose a comprehensive industrial policy framework. The policy framework relies on six pillars: directionality, knowledge creation and innovation, creating and reshaping markets, building capacity for governance and change, international coherence, and sensitivity to socio-economic implications of phase-outs. Complementary solutions relying on technological, organizational, and behavioural change must be pursued in parallel and throughout whole value chains. Current policy is limited to supporting mainly some options, e.g. energy efficiency and recycling, with some regions also adopting carbon pricing, although most often exempting the energy and emissions intensive industries. An extended range of options, such as demand management, materials efficiency, and electrification, must also be pursued to reach zero emissions. New policy research and evaluation approaches are needed to support and assess progress as these industries have hitherto largely been overlooked in domestic climate policy as well as international negotiations.
Key policy insights
Energy and emission intensive industries can no longer be complacent about the necessity of zero greenhouse gas (GHG) emissions.
Zero emissions require profound technology and organizational changes across whole material value chains, from primary production to reduced demand, recycling and end-of-life of metals, cement, plastics, and other materials.
New climate and industrial policies are necessary to transform basic materials industries, which are so far relatively sheltered from climate mitigation.
It is important to complement technology R&D with the reshaping of markets and strengthened governance capacities in this emerging policy domain.
Industrial transformation can be expected to take centre stage in future international climate policy and negotiations.
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