Ecological Economics 40 (2002) 23 – 37 ANALYSIS Economic growth and greenhouse gas emissions Alberto Ansuategi a,b, *, Marta Escapa b a Enironment Department, Uniersity of York, York, UK b Foundations of Economic Analysis Department, Uniersity of the Basque Country, Spain Received 22 December 2000; received in revised form 6 August 2001; accepted 27 September 2001 Abstract Recent empirical research has examined the relationship between certain indicators of environmental degradation and income, concluding that in some cases an inverted U-shaped relationship, which has been called an environmental Kuznets curve (EKC), exists between these variables. Unfortunately, this inverted U-shaped relationship does not hold for greenhouse gas emissions. One explanation of the absence of EKC-like behavior in greenhouse gas emissions is that greenhouse gases are special pollutants that create global, not local, disutility. But the international nature of global warming is not the only reason that prevents de-linking greenhouse gas emissions from economic growth. The intergenerational nature of the negative impact of greenhouse gas emissions may have also been an important factor preventing the implementation of greenhouse gas abatement measures in the past. In this paper we explore the effect that the presence of intergenerational spillovers has on the emissions – income relationship. We use a numerically calibrated overlapping generations model of climate – economy interactions. We conclude that: (1) the intertemporal responsibility of the regulatory agency, (2) the institutional capacity to make intergenerational transfers and (3) the presence of intergenerationally lagged impact of emissions constitute important determinants of the relationship between economic growth and greenhouse gas emissions. © 2002 Elsevier Science B.V. All rights reserved. Keywords: Environmental Kuznets Curve; Climate change; Intergenerational externalities www.elsevier.com/locate/ecolecon 1. Introduction The natural presence of the so-called ‘green- house gases’ (water vapor, carbon dioxide, nitrous oxides and methane) in the atmosphere is essential for life. Greenhouse gases (GHGs, hereafter) trap heat in the lower atmosphere and keep the Earth far warmer than it would be without such gases. 1 Over the Earth’s long history the concentration of these gases has markedly decreased. This decline has occurred due to complex transformation pro- * Corresponding author. Present address: Ekonomi Zientzien Fakultatea, Lehendakari Agirre Etorbidea 83, 48015 Bilbao, Spain. E-mail address: jepancoa@bs.ehu.es (A. Ansuategi). 1 In absence of these greenhouse gases the mean temperature of the Earth’s surface would be about 33 °C lower than it is today. 0921-8009/02/$ - see front matter © 2002 Elsevier Science B.V. All rights reserved. PII: S0921-8009(01)00272-5