Does drought increase carbon emissions? Evidence from Southwestern China

Abstract

The study estimates the impact of the 2009/2010 drought in southwestern China on industrial outcomes and carbon dioxide (CO2) emissions. We focus on the outputs of the power and energy-intensive sectors and investigate the substitution of thermal power for hydropower during this extreme drought. Panel data for 93,830 firms from 2006 to 2013 were used to examine their responses to this extreme climatic event. We find that severe drought reduced hydropower production as well as the economic output of energy-intensive sectors, while it increased the power production of thermal power firms. As a result, the net CO2 emissions in the southwest increased by 6,704,364 tons, about 0.64% increase of the total regional CO2 emissions each year from 2009 to 2013. These findings suggest that climate disasters may increase carbon emissions, thereby contributing to climate change.