Back of the Envelope Estimate of Emissions Reduction Due to the “Great Recession”

Recently, an attempt has been made at attributing the not too highly publicized  reduction in US CO2 emissions to various changes in the US “energy mix.” I’m not going to question their conclusions per se, in as far as it goes, but I would note that focusing on the technological changes ignores the fact that much of this reduction has been accompanied by reduced economic activity. It is certainly true that, since the end of the first World War, the US has produced less CO2 per unit of economic activity in a fairly consistent downward trend in “carbon intensity.” This represents, generally speaking, a trend toward more efficient use of energy, and could be expected to occur with or without economic downturns like the Great Recession. However, economic disruption can force changes in over all energy use and efficiency beyond technological changes/improvements. So the trends Berkeley Earth find are partly related to improved technology in terms of carbon intensity (most especially, a change over from coal to natural gas, and to a much lesser extent, actual technological developments in renewables. Otherwise, the changes are to sources of energy that produce less energy, not more efficient use of energy. So I set out to ask the question, “If the US economy hadn’t taken a major nosedive after 2007, what would emissions look like?

To begin with, my measure for economic activity is the sum of all non government expenditures: that is, GDP minus government spending. I do this to reflect, I think, a more accurate picture of actual economic production. I use this data for the portion of the economy which is made up of State, Local, and Federal spending (transfer payments between Federal, State, and Local are subtracted so that no spending is double counted). I use this data for the US GDP, and I change their deflator to baseline at 2012 so I get constant 2012 dollars. US Carbon Emissions are taken from here, and I use the preliminary estimates for 2011 and 2012. This is what the “Private Economy Carbon Intensity” looks like over time:

USPCI

As one might expect, it appears that the most recent “Great Recession” in fact set back the trend in reduction of “Carbon Intensity.” This makes some amount of sense, since technological progress would presumably be more difficult to finance and implement with less wealth to go around. So, for the counterfactual “No Great Recession” the assumption will be that after 2007, the trend would have been about -4.4*10^-06 metric tons/dollar/year-the slope of the linear regression of data from 1980-2007. Next, I asked the question, what was the average % growth rate from 1980-2007, of the Private Economy? As it turns out, the answer is ~2.4%. So assuming that rate after 2007, I can get where the private economy “would have been” if it hadn’t had a recession. Next, I take my “Counterfactual Private Economy Carbon Intensity” and “Counterfactual Private Economy” series, and multiply them to get the amount of emissions that “would have” occurred, or an estimate, at any rate. The result is that, absent a recession, US emissions would have declined from 2007 to 2012 by about 15 million metric tons, versus an actual decline of almost 193 million metric tons: 92% of emissions reduction since 2007 can be attributed to the poor performance of the economy, not technological progress. The plot below shows the actual (red) and counterfactual (blue) emissions, since 1800):

USEMIT

Clearly, one should not be too pleased with these emissions numbers, as they merely indicate that the US economy has been performing poorly. Unless, of course, that is your goal.

 

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One Response to “Back of the Envelope Estimate of Emissions Reduction Due to the “Great Recession””

  1. Climate Cycle, Meet Business Cycle-Preliminaries | Hypothesis Testing Says:

    […] As before, I will use US GDP data, with the portion representing Government spending removed, to represent actual meaningful production. Except this time, I really want more data than just back to 1890, so I use simple method to estimate the state and local spending from the federal spending: from 1890-2013, there is a correlation between a change in federal spending as a fraction of GDP and a change in federal spending as a fraction of total spending-the correlation is better in later years, so one should be a little bit weary of extending it back in time. But let’s proceed with reckless abandon nonetheless. The main purpose is to properly restrict what are mostly war spikes to increases in federal spending. I can use this relationship to estimate how much of the total government spending before 1890 was made up of federal spending and how much state and local spending. One can then use the estimated fraction, federal/totgov, with the actual federal spending, to get an estimate of total government spending in years before 1890. Anyway, this is what that fraction looks like, with the estimated portion highlighted: […]

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