Economic Growth, CO2 Emissions Quota and Optimal Allocation under Uncertainty

This study attempts to link greenhouse gas emissions and economic development, and under the premise of considering economic development, proposes an optimal quota of greenhouse gas emissions. Based on the environmental Kuznets curve hypothesis, the logarithmic value of greenhouse gas emissions is an inverted U-shaped function of the logarithmic value of GDP per capita. The empirical results showed that most countries in the world support the Kuznets curve hypothesis. Moreover, using data collected from Our World in Data, the optimal allocation of a greenhouse gas emissions quota can be found by minimizing the uncertainty risk subject to a prespecified global economic growth rate. For government policymakers, they may apply the framework in this study to determine an optimal allocation of greenhouse gas emissions for each sector that will ensure the intended level of domestic economic growth.

Automated summary

This study explores the connection between greenhouse gas emissions and economic development, proposing an optimal quota for greenhouse gas emissions while considering economic growth. The results support the environmental Kuznets curve hypothesis, showing an inverted U-shaped relationship between logarithmic greenhouse gas emissions and logarithmic GDP per capita. By minimizing uncertainty risks and adhering to a specified global economic growth rate, the study suggests a method for determining the best allocation of greenhouse gas emissions. Government policymakers can use this framework to allocate emissions quotas for each sector, ensuring intended levels of domestic economic growth.