Determinants of green growth

• Thesis title in Czech: Determinanty růstu zeleně
• Thesis title in English: Determinants of green growth
• English key words: Emissions-output decoupling, HP filter, OLS, absolute decoupling, Environmental Kuznets Curve, emissions-output elasticity
• Academic year of topic announcement: 2021/2022
• Thesis type: diploma thesis
• Thesis language: angličtina
• Department: Institute of Economic Studies (23-IES)
• Supervisor: PhDr. Jaromír Baxa, Ph.D.
• Author: hidden - assigned by the advisor
• Date of registration: 23.06.2022
• Date of assignment: 23.06.2022
• Date and time of defence: 21.06.2023 09:00
• Venue of defence: Opletalova, O206, místnost. č. 206
• Date of electronic submission: 01.05.2023
• Date of proceeded defence: 21.06.2023
• Opponents: Mgr. Milan Ščasný, Ph.D.

Guidelines

Motivation:
Pollution, climate change and degradation of the environment are consequences of economic activity. However, economic activity is intrinsically human and hypotheses of “degrowth” do not seem viable. Therefore, in the light of increasingly worrying studies and reports on climate change the OECD has launched in 2011 a “Green Growth Strategy”, providing tools of measurement and support for countries trying to combine both successful economic activity and respect of the environment. To quote the OECD, “green growth means fostering economic growth and development while ensuring that natural assets continue to provide the resources and environmental services on which our well-being relies”.
Achieving sustainable growth and ensuring protection of natural ecosystems is a durable strategy yet a difficult one. What factors influence green growth? How can we create green growth in the first place? The literature on the topic actually varies a lot, with a spectrum of opinions on green growth determinants and whether their influence is positive, negative or even insignificant.

1. Hypothesis #1: several factors may affect green growth in different ways (positive or negative)
2. Hypothesis #2: Trade, innovation and propensity to consume green products will be relevant factors
3. Hypothesis #3: green growth determinants differ across countries/regions

Methodology:
I will mainly use the OECD green growth index and the World development indicators as well as other data coming from the OECD database.
I will use variables that are seen in most studies such as growth or energy consumption (renewable and non renewable) but also different new variables such as (green) fintech, green purchasing behavior, energy prices, green innovation and patents and so on.
I will also compare the determinants across countries from 2011 to the most recent data available.
I will use panel data estimation and most likely some form of fixed or random effects.
I may also use population, historical events and geographical specificities as control variables.

Expected Contribution:
The main implication of my thesis will be to look at the determinants and factors that influence green growth across countries. This renewed study will have relevant policy
implications to know which factors policy makers can act on to promote green growth and which new factors can be relevant to test.

References

Cohen, G., Jalles, J. T., Loungani, P., & Marto, R. (2018). The long-run decoupling of emissions and
output: evidence from the largest emitters. Energy Policy, 118, 58-68.
Cohen, G., Jalles, J. T., Loungani, P., Marto, R., & Wang, G. (2019). Decoupling of emissions and GDP:
Evidence from aggregate and provincial Chinese data. Energy Economics, 77, 105-118.
G. Cohen, J.T. Jalles, P. Loungani, R. Marto (2017). Emissions and Growth: Trends and Cycles in a
Globalized World. IMF Working Papers, Volume 2017: Issue 191.
https://doi.org/10.5089/9781484316702.001
Papież, M., Śmiech, S., & Frodyma, K. (2022). Does the European Union energy policy support progress
in decoupling economic growth from emissions?. Energy Policy, 170, 113247.
Narayan, P. K., & Narayan, S. (2010). Carbon dioxide emissions and economic growth: Panel data
evidence from developing countries. Energy policy, 38(1), 661-666.
Grossman, G. M., & Krueger, A. B. (1995). Economic growth and the environment. The quarterly journal of
economics, 110(2), 353-377.
Hickel, J. and Kallis, G. (2019). Is Green Growth Possible?. New Political Economy. 25. 1-18.
10.1080/13563467.2019.1598964.
Liddle, B. (2013). Population, affluence, and environmental impact across development: evidence from
panel cointegration modeling. Environmental modeling & software, 40, 255-266.

Preliminary scope of work

Climate change and sustainability are considered the biggest challenges of our time. In light of
such urgency, governments, firms and institutions make considerable efforts by setting ambitious
goals as set in the Paris Agreement. Much has been written on decoupling, emissions-output
elasticity as well as the Environmental Kuznets Curve to test whether increased income (or GDP
growth) is compatible with the environment.
However, there is no consensus on whether the decoupling of emissions from income has been
achieved. Both econometric decoupling studies as well as EKC focused research achieve
conflicting conclusions (and at the scale of both the world but also country specific). Cohen et al
(2014) argue that most studies’ results are misleading as they fail in differentiating short term
fluctuations (cycles) and long term structural changes (trends) in the emissions-output relation.
While Cohen et al (2014) study is part of the literature on emission cycles, little has been written
on measuring long term decoupling using output and emissions trends (aside from Papiez et al,
2022). Thus this thesis will attempt to fill this gap in the literature, first by using Cohen et al
(2014) model and updating it to more recent results using a framework that has rarely been used.
And second by extending it by testing the Environmental Kuznets Curve and estimating
decoupling at the global level. Production based and consumption based CO2 emissions will be
used to test the PHH (pollution haven hypothesis).

Preliminary scope of work in English

This thesis will contribute to the literature on decoupling by using trend-cycle decomposition.
This technique has only been used by Cohen et al. (2018), Cohen et al. (2022) and Papiez et al.
(2022) and remains to be exploited and extended. Contrary to the literature on decoupling so far,
this allows us to distinguish between short term fluctuations due to the business cycles and long
term trends in changes of CO2 emissions.