Do Global CO2 Emissions from Fossil-Fuel Consumption Exhibit Long Memory? A Fractional Integration Analysis

José Belbute and Alfredo Pereira

No 165, Working Papers from Department of Economics, College of William and Mary

Abstract: In this paper we use an ARFIMA approach to measure the degree of fractional integration of aggregate world CO2 emissions and its five components – coal, oil, gas, cement, and gas flaring. We find that all variables are stationary and mean reverting, but exhibit long-term memory. With aggregate CO2 emissions as a reference, our results suggest that both coal and oil combustion emissions have the weakest degree of long-range dependence, while emissions from gas, and gas flaring have the strongest. With evidence of long memory, we conclude that transitory policy shocks are likely to have long-lasting effects. Although the effects of any active policy on CO2 emissions take longer to disappear, they preserve their temporary nature. Accordingly, permanent effects on CO2 emissions require a more permanent policy stance. In this context, if one were to rely only on testing for stationarity and non-stationarity, one would likely conclude in favor of non-stationarity, and therefore that even transitory policy shocks have permanent effects. Our fractional integration analysis highlights that this is not the case.

Keywords: CO2 emissions; Long memory; ARFIMA model (search for similar items in EconPapers)
JEL-codes: C22 O13 Q41 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2016-04-05
New Economics Papers: this item is included in nep-ene and nep-env
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