CO2 Emissions Reductions lead to Slower Growth

Activists inadvertently show decoupling economic growth from CO2 emissions reductions is a myth

Since my article about slow productivity growth being related to high energy costs arising from Net Zero policies was published, I have noticed various people on Twitter making claims that reducing CO₂ emissions is good for growth. The phrase used is “decoupling emissions from economic activity.”

An example is this tweet by Alec Stapp of the Institute for Progress shown in Figure 1. This far from the only example with similar tweets here, here and here.

Figure 1: Alec Stapp tweet of Economic Growth vs CO2 Emissions

Using figures from Our World in Data, the claim is that “we can increase economic growth while decreasing CO₂ emissions”. The chart shows the economic growth of 25 countries compared to emissions reductions from 2005-19. At the time of writing that tweet had received over 452,000 views.

The trouble is, closer analysis of the data illustrates the point I was making rather well. If you plot a scatter chart of growth versus CO₂ emissions reduction, you can see the opposite of what is claimed.

Figure 2: Economic Growth Slows as CO₂ Emissions cuts rise

Aside from outliers Romania, Ireland and Singapore, there is a clear correlation that shows bigger emissions reductions lead to slower growth, or smaller cuts lead to faster growth (blue dots on Figure 2).

This gives further support to my analysis showing high electricity costs reduce productivity growth.

Figure 3: Industrial Electricity Costs 2021 vs Productivity Growth 2008-2021 for Selected Countries

It seems to me that the claim of decoupling economic growth from CO₂ emissions is a myth.

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