Emissions-adjusted total factor productivity

Maarten De Ridder and Lukasz Rachel

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: In many economies, the recent productivity slowdown coincided with declines in carbon dioxide emissions. Productivity statistics ignore this progress, even though lower emissions raise future consumption. We propose emissions-adjusted total factor productivity (TFPE), a forward-looking, welfare-relevant productivity measure. TFPE requires few assumptions, relying on the social cost of carbon as a sufficient statistic. At recent consensus estimates of the social cost of carbon, U.S. TFPE could grow twice as fast as TFP during a transition to net zero by 2050. At these costs of carbon, historical productivity adjustments are modest; at higher values, the post-2005 U.S. productivity slowdown disappears. In other countries, TFPE growth significantly exceeds TFP growth during the 1990s.

Keywords: total factor productivity; growth accounting; national accounts; climate damages (search for similar items in EconPapers)
JEL-codes: J01 N0 R14 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2026-09-11
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