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Gail Cohen, João Tovar Jalles, Mr. Prakash Loungani, and Ricardo Marto
For the world's 20 largest emitters, we use a simple trend/cycle decomposition to provide evidence of decoupling between greenhouse gas emissions and output in richer nations, particularly in European countries, but not yet in emerging markets. If consumption-based emissions—measures that account for countries' net emissions embodied in cross-border trade—are used, the evidence for decoupling in the richer economies gets weaker. Countries with underlying policy frameworks more supportive of renewable energy and climate change mitigation efforts tend to show greater decoupling between trend emissions and trend GDP, and for both production- and consumption-based emissions. The relationship between trend emissions and trend GDP has also become much weaker in the last two decades than in preceding decades.
Gail Cohen, João Tovar Jalles, Mr. Prakash Loungani, Ricardo Marto, and Gewei Wang
We provide a comprehensive analysis of the relationship between greenhouse gas (GHG) emissions and GDP in China using both aggregate and provincial data. The Kuznets elasticity is about 0.6 for China, higher than that in advanced countries but below that of major emerging markets. The elasticity is somewhat lower for consumption-based emissions than for production-based emissions, providing mild evidence consistent with the “pollution haven” hypothesis. The Kuznets elasticity is much lower for the last three decades than for the three previous decades, suggesting a longer-term trend toward decoupling as China has become richer. Further evidence of this comes from provincial data: richer provinces tend to have smaller Kuznets elasticities than poorer ones. In addition to the trend relationship, we find that the Environmental Okun's Law holds in China.
Gail Cohen, João Tovar Jalles, Mr. Prakash Loungani, and Ricardo Marto
Recent discussions of the extent of decoupling between greenhouse gas (GHG) emissions and real gross domestic product (GDP) provide mixed evidence and have generated much debate. We show that to get a clear picture of decoupling it is important to distinguish cycles from trends: there is an Environmental Okun's Law (a cyclical relationship between emissions and real GDP) that often obscures the trend relationship between emissions and real GDP. We show that, once the cyclical relationship is accounted for, the trends show evidence of decoupling in richer nations—particularly in European countries, but not yet in emerging markets. The picture changes somewhat, however, if we take into consideration the effects of international trade, that is, if we distinguish between production-based and consumption-based emissions. Once we add in their net emission transfers, the evidence for decoupling among the richer countries gets weaker. The good news is that countries with underlying policy frameworks more supportive of renewable energy and supportive of climate change tend to have greater decoupling between trend emissions and trend GDP, and for both production- and consumption-based emissions.
Gail Cohen, João Tovar Jalles, Mr. Prakash Loungani, and Ricardo Marto

Front Matter Page Research Department and Fiscal Department Contents 1. Introduction 2. Empirical Approach 3. Data 4. Trends and Cycles 4.1. Is there an Environmental Okun’s Law? 4.2. Do Kuznets elasticities reflect a low-carbon transition? 4.3. Robustness checks 5. Globalization and Emissions 5.1. Trade matters for emissions 5.2. Revisiting Okun and Kuznets elasticities 6. Explaining Cross-Country Differences 7. Conclusion References Appendix 1. Additional figures 2. Additional tables Figures

Gail Cohen, Joao Jalles, Mr. Prakash Loungani, Ricardo Marto, Gewei Wang, and Mr. Chris Papageorgiou

results from provincial data hold out the hope that the relationship between emissions and GDP growth will weaken as China gets richer. We also provide evidence on the cyclical relationship between emissions and GDP growth, viz., on the Environmental Okun’s Law (EOL). The Okun elasticity—the response of the cyclical component of emissions to the cyclical component of GDP—ranges from 0.35 to 0.65, depending on the filtering method used and on whether production-based or consumption-based emissions are used. We find evidence of asymmetry in EOL: the Okun elasticity is

Gail Cohen, Joao Jalles, Mr. Prakash Loungani, and Ricardo Marto

1. Introduction There are conflicting claims on whether emissions and economic activity have decoupled. Part of the debate arises from a failure to distinguish business cycles from trends: there is an Environmental Okun’s Law (a cyclical relationship between emissions and real GDP) that often obscures the Environmental Kuznets Curve (the trend relationship between emissions and real GDP). By decomposing emissions and real GDP into their trend and cyclical components, we show that once the cyclical relationship is accounted for, the trends reveal evidence of