The UN Climate Change Conference in Paris set the goal of limiting global warming to 2 °C, by lowering CO₂ emissions. Using the elasticity concept from economics we shed light on how much countries can feasibly lower the emissions.
We find that global emissions may be reduced by almost 60%. China, the US, Russia and India together contribute 71% of the global reduction. North Korea has the largest relative reduction opportunity: 91%.
Elasticity measures how much one variable changes another variable. For example, if income changes a certain amount, how much does demand change as a result?
We applied the elasticity concept to changes in CO₂ emissions as a function of changes in population and changes in GDP per capita. Presumably, if population grows, emissions grow; and the more that is produced (GDP), the higher the emissions. The data are taken from the World Bank’s WDI database, containing 198 countries in 2011.
The population elasticity is close to 1. If population grows 1%, then emission grows 1%, ceteris paribus. The GDP elasticity is 1.15 in 2011. This means that CO₂ emissions grow slightly faster than GDP/capita growth. With this knowledge, we predict emissions and compare them to actual emissions as shown in the graph below. The diagonal shows where predicted and actual emissions are the same.
Countries above the diagonal over-emit; countries below the diagonal under-emit.
Next, we create what is called the envelope. This (red) line is drawn so that the bottom quartile of countries are below it. It represents the feasible reduction goal. We call it feasible because many (25%) countries are already doing better.*
We then calculate how far above or below the envelope each country was in 2011. The color in the map below shows if a country is far above the envelope (dark red), or far below the envelope (dark blue). The area of the circle shows the total size of emissions.
CLICK ON THE MAP TO ENLARGE IT
The area of a circle is proportional to the country’s total CO₂ emissions. The color of a circle ranges from low relative emissions (dark blue) to high relative emissions (dark red)
A visual inspection suggests that a handful of countries offer the the bulk of reduction opportunities because:
- They are large emitters in absolute terms (large circles)
- And they are far or well above the envelope (redness)
The graphs below confirm this.
It is also interesting to see how large the relative reduction opportunities are. The graph below shows that North Korea is worst performer (the farthest above the envelope line). China ranks 12th.
Finally, it should be noted that progress has been made. The following graph shows that the GDP elasticity has fallen between 1992 and 2011. This is evidenced by the fact that most countries have CO₂ emissions growing slower than GDP.
Analytically, this post demonstrates the power of using only one concept –elasticity–applied in a multi-faceted way, to better understand an important issue.
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* Note that we also reduce the GDP elasticity to 1.0 since becoming more affluent should not allow disproportionately larger emissions. This is why the envelope is not parallel to the diagonal.
The simplified Stata files are available here.