Put another way, while productivity gains in the economy reduce emissions by letting us consume more with fewer inputs, the taxes and regulations that accompany climate policies carry a “deadweight loss” that trades productivity improvement for direct emission abatement. This creates a tradeoff typically not included in analysis and potentially explains why having many regulations or subsidies does not deliver commensurate improvements to carbon intensity.
We see support for this in the data analysis of carbon intensity. Even as emissions fluctuated across presidencies, they all had comparable carbon intensity gains. A caveat is that more variables explain the economic side of the carbon intensity equation than just climate policy. A president who is more likely to adopt climate policies may also be more likely to adopt other economic policies that drag on economic growth and diminish the potential carbon intensity gains of their climate policies.
But the idea that the broader economy matters more than climate policy is not new, and a good analysis on the topic can be found in the Conservative Coalition for Climate (C3) Solutions report Free Economies are Clean Economies. C3 Solutions highlights the significant correlation between open market conditions and environmental quality in an economy. This is likely because wealthier economies place greater value on environmental quality (covered in a past Low-Energy Fridays post). But even if one rejects that notion, the phenomenon of countries emitting less as they get richer has been academically analyzed since 1995, when it was noted that a nation’s emissions level naturally increases, peaks, and falls in accordance with its wealth.
The views and opinions expressed are those of the author’s and do not necessarily reflect the official policy or position of C3.
