Abstract

For the first time in the scientific literature, this research establishes empirical evidence for the existence of a causal relationship among fossil fuel-based carbon dioxide (CO₂) emissions in the United States (US), her gross domestic product (GDP) and world crude price. Estimated long-run income elasticity of CO₂ emissions is as high as 3.2% in the US. A strong bi-directional long-run causality is found between CO₂ emissions and GDP. Short-run causality runs from crude price to CO₂ emissions to GDP. Monte Carlo stochastic simulations of the model developed reveal even a small increase in the reference real GDP growth rate causes considerable increase in the future CO₂ emissions in the US. Results of this study therefore suggest urgent policy actions are imperative in the US to decouple the strong causal relationship existing between her CO₂ emissions and GDP, and to ensure sustainable economical development in the US.

This work is licensed under a Creative Commons Attribution 4.0 License.