Decoupling is not enough - Evidence from fossil fuel use in over 130 countries

Abstract

This study offers an in-depth analysis of decoupling economic growth from fossil fuel use in over 130 countries between 1992 and 2019. It also examines four potential fossil fuel use determinants: urbanisation, industrialisation, trade openness, and the share of renewable energy sources. To examine the analysed relationship, the mixed effect models are applied for the trend components of the series. Fossil fuel use is represented by two measures: domestic material consumption and material footprint. Countries are either clustered into four groups of human development tiers measured by the HDI index or their income is considered. The results reveal that a stronger decoupling, with an elasticity of 0.42, is obtained for domestic material consumption than for the material footprint (0.72). The degree of decoupling is more homogeneous among groups of countries in the case of material footprint. The correlation between decoupling strength and reference fossil fuel use is negative and very strong (around −0.97). As well-being increases, the sensitivity of fossil fuel use to economic growth tends to weaken; nevertheless, wealthier countries consume more fossil fuels. The development of renewable energy sources is the only factor leading to a reduction in fossil fuel use in countries at all levels of development.