Carbon curse: As you extract, so you will burn

Abstract

The “Carbon Curse” theory suggests that fossil fuel wealth leads countries to have more carbon intensive development trajectories than they would otherwise. Using causal inference for cross-country panel data spanning 1950–2018, we globally estimate the effect of giant oil and gas discoveries on carbon emissions. Our findings show that the effect is sizable and persistent. Our results show a substantial and persistent impact: Countries that experience giant oil and gas discoveries emit approximately 50% more post-discovery CO2 per unit of GDP and per capita compared to their resource-poor counterparts. The effect is even higher in developing economies, with an increase of around 65%, compared to about 33% in developed countries. These findings highlight the significant barriers that fossil fuel-rich nations face in aligning with decarbonization goals, posing substantial challenges for meeting the Paris Agreement targets. By exploiting the randomness of the timing of discoveries, we provide the first plausibly-causal evidence in support of the”Carbon Curse”.