The Long-Run Decoupling of Emissions and Output: Evidence from the Largest Emitters

IMF Working Papers, March 13, 2018

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For the world's 20 largest emitters, a simple trend/cycle decomposition provides evidence of decoupling between greenhouse gas emissions and output in richer nations, particularly in European countries, but not yet in emerging markets.
Using consumption-based emissions—measures that account for countries' net emissions embodied in cross-border trade—weakens the evidence for decoupling in the richer economies.
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, for both production- and consumption-based emissions.
The relationship between trend emissions and trend GDP has become much weaker in the last two decades than in preceding decades.

Sample: the world's 20 largest emitters.
Analytical approach: simple trend/cycle decomposition to separate trend emissions and trend GDP from cyclical components.
Emissions measures: both production-based emissions and consumption-based emissions (net emissions embodied in cross-border trade) are considered.

Stronger policy frameworks supportive of renewable energy and mitigation are associated with greater long-run decoupling between emissions and output.
Evidence suggests richer (especially European) countries have achieved measurable decoupling, while emerging markets have not yet shown the same pattern.
Accounting for consumption-based emissions can change the assessment of decoupling outcomes and may attenuate apparent progress in richer economies.