How do CO2 emissions vary with the business cycle? An empirical study

Date

2011-05

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Abstract

There are various explanations that may be attributed to an increased or decreased amount of carbon dioxide emissions during an economic downturn. My thesis aims to investigate how CO2 emissions vary with the business cycle by analyzing emissions from three major sources of energy in four different sectors of the economy. Specifically, I examine carbon dioxide emissions from energy consumption due to coal, natural gas, and petroleum in the residential, commercial, industrial, and transportation sectors of the U.S. economy. I present cross-correlations of 12 monthly leads and lags in each of the major sources of energy with respect to a coincident index of economic activity and I estimate a vector error correction model. Lastly, I illustrate and interpret various impulse response functions. My findings validate that CO2 emissions from residential, commercial, industrial, and transportation sources are procyclical.

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Keywords

Environmental, Business cycles

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