Energy price shocks, fossil fuel dependence, and carbon emissions (CO₂): A multi-stage transmission framework analysis

This paper investigates how energy price shocks are transmitted through energy consumption and fuel composition into carbon emissions, and how G۷ carbon outcomes relate to global temperature dynamics, over the period ۱۹۹۱–۲۰۲۴. Using a balanced panel of ۲۳۸ country-year observations for Canada, France, Germany, Italy, Japan, the United Kingdom and the United States, the analysis estimates a four-stage transmission chain: (i) energy price shocks to primary energy supply; (ii) energy price shocks to fossil fuel consumption; (iii) energy consumption composition to total  emissions; and (iv) aggregate G۷ emissions to global temperature anomaly. Country fixed-effects models with Driscoll–Kraay standard errors are used for the panel stages, while Newey–West autocorrelation- and heteroskedasticity-consistent standard errors are used for the aggregate climate-stage time-series models. The results indicate that Brent oil price shocks are positively associated with G۷ primary energy supply and, more weakly, with fossil fuel consumption, whereas natural gas and coal price shocks show no robust direct effects in the baseline panel. The carbon channel is considerably stronger: fossil fuel consumption and coal consumption are robust positive drivers of  emissions, while the renewable energy share significantly reduces emissions, particularly in the coal-channel and per-capita specifications. The aggregate climate stage shows that global temperature anomaly is highly persistent and trend-driven; once lagged temperature or a deterministic trend is included, contemporaneous G۷ emissions lose explanatory power. The paper therefore frames its contribution as identifying a transmission mechanism – energy price shocks shape energy use, which in turn shapes emissions–rather than claiming a direct energy-price-to-temperature effect, and concludes that G۷ decarbonisation, although necessary, is insufficient to explain global climate outcomes on its own.

کلیدواژه ها:

Energy price shocks ، Fossil fuel consumption ، CO_۲ emissions ، Renewable energy ، Climate change ، G۷ economies ، Driscoll–Kraay standard errors ، Energy transition