Emissions-Adjusted Total Factor Productivity

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Paper Summary

Conflicts of Interest

Identified Weaknesses

Rating Explanation

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Paper Summary

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Is the US More Productive Than We Think? Adjusting for Emissions Paints a Different Picture

This research proposes "Emissions-Adjusted Total Factor Productivity" (TFPE), which accounts for pollution's long-term damage. The analysis finds that the U.S. experienced steadier TFPE growth since 2005 compared to traditional measures, especially when using high estimates of carbon's social cost, due to declining emissions. The findings also highlight that while many advanced economies experienced similar TFPE trends, some developing nations experienced stark decreases.

Possible Conflicts of Interest

The authors acknowledge financial support from the Structural Transformation and Growth (STEG) research initiative. No other conflicts are readily apparent.

Identified Weaknesses

Dependence on Social Cost of Carbon Estimates

The social cost of carbon is a highly debated topic, with estimates varying substantially. This makes the calculation of TFPE sensitive to the chosen SCC estimate.

Limited Practical Difference Between Emission Measures

While the paper advocates for the use of consumption-based emissions, it acknowledges that these are highly correlated with territorial emissions. The choice between the two might not significantly alter the results for many countries.

Limited Scope of Emissions

The paper's focus is mainly on carbon dioxide emissions. Other factors that affect climate and output, such as methane emissions or deforestation, are not incorporated into the analysis.

Linearity Assumption

The presented framework assumes that costs of climate change are linear in temperature change. This might underestimate the true cost of climate change if damages are convex.

Rating Explanation

This paper presents a novel and relevant approach to measuring productivity by incorporating climate damages. The methodology is sound and builds on established economic theory. The use of readily available data and the explicit consideration of different social cost of carbon estimates make the results transparent and robust. However, limitations related to the social cost of carbon estimates, simplified emission measures, and scope call for further research.

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