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The implications of the economic slowdown for greenhouse gas emissions and targets

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emissions and targets

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The global recession coincides with both the 2008-2012 commitment period for the Kyoto Protocol and the negotiations for its successor at Copenhagen in December. This has led to many articles in the world's press and statements by world leaders that portray the recession as either a threat to or an opportunity for these negotiations. But how might these economic developments affect greenhouse gas emissions, given the importance of economic activities in generating the latter? Do they make it easier to achieve the goals of policies to combat human-induced climate change? Should the goals be amended in the light of the crisis? This report investigates these questions as follows. In Part 1, the key implications of the economic literature for understanding the possible impact on greenhouse gas emissions are drawn out. In Part 2, the quantitative implications are illustrated for the world and for the United Kingdom, using a very simple modelling approach that nevertheless we think is broadly consistent with the lessons of the economic literature. The main message is that even though the global recession may permanently and significantly lower the trajectory for annual world greenhouse gas emissions under 'business as usual', the time at which the world broke through the widely proposed ceiling of a 2°C increase in global mean temperatures would be delayed by a trivial amount. In Part 3, the underlying assumption that the trend in the energy intensity of output would be unaffected by the recession is examined by carrying out an empirical study of UK businesses' energy use, relating it to the age of their capital stock. It concludes that firms with more recently installed capital tend to use less energy per unit of output, so that a recession that slows investment is likely to raise energy intensity compared with the no-recession case. That will tend to offset in part the direct impact of a lower path for GDP on greenhouse gas emissions. The study illustrates the benefits of understanding better the economic responses of greenhouse gas emitters to changes in the economy as a whole. In Part 4, some of the implications of the report's findings for climate-change policy targets are explored.

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