Random-parameters analysis of energy consumption and economic output on carbon dioxide emissions

This paper takes a renewed look at the impacts of energy consumption (fossil fuels and renewable) and economic output on carbon dioxide emissions. Using country-level data from 103 countries from 1990 to 2011, a random-parameters model was developed, to account for unobserved heterogeneity across countries, and create potential strategies for reducing carbon dioxide emissions across countries. In order to reduce carbon dioxide emissions, two broad strategies were found to be feasible in this paper: systematic reduction in fossil fuels use through energy conservation and an expansion in the consumption of renewable energy sources that are free from CO2 emissions. On average, a 1 % decrease in fossil fuels consumption would decrease carbon dioxide emissions by an average of 1.46 %, varying from 0.17 to 2.44 % across countries. While a 1 % increase in renewable energy consumption would decrease CO2 emissions by 0.01 to 0.68 %, with an average of 0.18 %. Newly industrialized countries can significantly improve economic output by creating opportunities for industries to invest in green energy, which will significantly boost economic growth. The strategy of conserving fossil fuels through increasing efficiencies in vehicle fuels, power plants, buildings, and travel demand management are feasible to ensure sustainable reductions in global carbon dioxide emissions. © 2015, Springer-Verlag Berlin Heidelberg.