Pollution and Global Warming

The nexus between economic growth and the environment has long been a key topic in economic and policy research. It is well understood that economic growth leads to environmental degradation in the early stages of development. However, when the current presidential administration declared that the United States would rescind its participation in the Paris Agreement on climate change despite its status as one of the leading countries in the Agreement, a debate reemerged about the effectiveness of climate agreements in curbing GHG emissions at the expense of economic growth. This work responds to this revitalized debate by reassessing the empirical link between economic growth, GHG emissions, and international climate agreements. The United Nations Framework Convention on Climate Change (UNFCCC) is considered by many as the most significant international collaboration in the fight against climate change. However, few studies on the link between economic growth and the environment control for the effect of the UNFCCC on reducing GHG emissions; therefore, empirical estimates of the impact of growth on emissions may not fully reflect the effectiveness of international climate agreements. To our knowledge, our study is the first to examine this important relationship. Specifically, we utilize a difference-in-differences (DID) model to examine growth and GHG emissions in Annex-I countries and non-Annex I G20 countries before and after the Kyoto Protocol was signed, as a proxy for the effect of UNFCCC on emissions reductions. Additionally, unlike most existing growth and environment studies, which only use carbon dioxide (CO2) emissions as a proxy for environmental degradation, we use a broader measure of emissions which includes CO2, methane (CH4), nitrous oxide (N2O), other and F-gases. We control for serial correlation, heterogeneity, and other potential endogeneity problems. Preliminary results indicate that the Kyoto Protocol agreement led to a statistically significant reduction in GHG emissions.