Is the EU cap and trade system starting to work? The EU’s GDP growth rate fell from 2.65% in 2007 to 0.8% in 2008. This 1.85% drop in GDP growth was accompanied by a 3.1% reduction in CO2 emissions. This yields a ratio of CO2 reduction over GDP growth reduction of 1.7. The US’s GDP growth rate fell from 3.3% in 2007 to 1.1% in 2008. This 2.2% drop in GDP growth was accompanied by a 3.3% reduction in emissions. This yields a ratio of CO2 reduction over GDP growth reduction of 1.5 — only a smidge lower.
But the US economy emits 50% more CO2 per dollar of output than the EU economy. So one might naively expect to see substantially larger CO2 reductions in the US from an equivalent drop in GDP growth rates. If Europe achieved CO2 emissions reductions about as large as the US’s in 2008 despite similar economic slumps and Europe’s much lower CO2 emissions per dollar of GDP, that would seem to indicate that something else — most likely Europe’s cap-and-trade system — is starting to bring down European emissions.
Then again maybe not. I imagine you’d really have to look at how particular sectors were affected by the economic downturn and how their emissions changed to get a sense of this stuff.
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