Graduate Research and Discovery Symposium (GRADS)


The Effect of CO₂ Abatement Policies on TFP Growth

Document Type



Policy Studies

Publication Date

Spring 2013


The measurement and interpretation of economic growth has always been of extreme importance to both economics and policy-makers. Growing national production means higher income as well as higher living standards, but it cannot entirely be explained by the higher use of capital and labor. Even taking into account the accumulation of these conventional factors of production, a portion of the output growth still remains unexplained, and illuminated with the notion of Total Factor Productivity (TFP) growth. Environment is an indispensable factor of the production process, therefore contributes to countries’ economic growth. In this study, the environment is taken into consideration in TFP growth measurement, focusing on the role of environment as well as environmental policies in the economic growth of countries. The objective is to estimate TFP growth allowing for CO2 emissions along with capital, labor, and technical change for 31 OECD high-income countries between the years 1992 and 2008. Once TFP growth rates are calculated, this analysis will involve: (i) observing the effects of CO2 on TFP growth through a dynamic decomposition analysis, and (ii) suggesting/stimulating CO2 abatement scenarios to hitting the targets established by the United Nations Framework Convention on Climate Change.

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