Economic Analysis of Global CO2 Emissions and Energy Consumption Based on the World Kaya Identity

Abstract

This research seeks to elucidate the relationship between economic activities, energy consumption, and CO2 emissions, thereby contributing to a deeper understanding of the economic dimensions of climate change mitigation efforts within the European context, which may be useful for developing policies to mitigate CO2 emissions and promote sustainable development. This study investigates world CO2 emissions and their relation to population growth and finds a strong positive relation based on data from 1969 to 2023. The World Kaya Identity has been applied to understand how changes in the involved factors affect CO2 emissions over time. When studying the more complex relation between the variables by controlling for energy use, GDP, and carbon intensity based on the Kaya Identity, the authors identified an overall long-term coupling of all factors. Considering short-term variations, population growth appears to have an insignificant effect, and carbon intensity appears most influential on CO2 emissions. As a next step, we take a disaggregated view on different country settings, economic sectors, and energy sources to further analyze the role carbon intensity plays for increased CO2 emissions. Here, we lay a special focus on the European perspective. This descriptive analysis lets us draw some general conclusions regarding strategies for reducing the negative impact of CO2 emissions and political efforts for sustainability transformations. This study is important for the current state of science, since a clear economic assessment of the negative effects of carbon dioxide is necessary for planning measures and costs in the ecological sphere, the correct assessment of the impact on the health of the population, the prospective implementation of preventive measures at all levels, and financing measures to reduce the negative effects of carbon dioxide. The authors found a significant positive effect of GDPpc, energy intensity, and carbon intensity on impact and an insignificant effect on the population. Thus, an unexpected increase in the population likely does not have short-term effects on CO2 emissions, and the responses to GDPpc and energy intensity both decrease after some periods, while the shock in carbon intensity shows a significant effect even after 10 years. This is reasonable in the sense that both increases in GDP and energy intensity might be alleviated by technological progress and, thus, only show a short-term positive effect on CO2 emissions. The carbon intensity of energy consumption is more crucial for the long-term change of CO2 emissions. For this reason, we study the decomposition of energy use in more detail by considering descriptive statistics over time and over different sectors and countries.