This thesis investigates the impact of structural transformation in large, newly industrializing countries on the international price of oil and on carbon emissions.
The first essay measures the impact of industrialization in China and India on the oil price in the OECD. I identify an inverted-U shaped relationship in the data between aggregate oil intensity and the extent of structural transformation. I construct and calibrate a multi-sector, multi-country, general equilibrium growth model that accounts for this fact and use it to show that structural transformation in China and India explains up to a quarter of the oil price increase in the OECD between 1970 and 2007. Continued structural transformation however, results in a falling oil price. A standard one-sector growth model misses this non-linearity. To understand the impact of growth on the oil price, it is necessary to take a more disaggregated view than is standard in macroeconomics.
The second essay empirically analyzes the source of the Environmental Kuznets Curve (EKC) - an inverted-U shaped relationship between emissions and income per capita. Recent theory claims that the EKC relationship is driven by falling growth rates associated with convergence to a balanced growth path. A decomposition of emissions however, shows that falling emission intensity growth rates dominate growth effects by an order of magnitude. Structural transformation is one mechanism capable of generating the observed patterns in emission intensity growth rates.
The third essay investigates the extent to which a country's structural transformation influences its emission profile. I document how CO2 emission intensity follows an inverted-U with income, despite falling energy intensities. This pattern is driven by changing fuel mix and improvements in energy efficiency associated with structural transformation. I construct and calibrate a two-sector, general equilibrium model that accounts for the emission, emission intensity and energy intensity profiles of the UK for 150 years. I show that a one sector framework is incapable of matching both a hump-shape emission and a falling energy intensity; that timing of structural transformation matters for emission profiles and that improvements in energy efficiency may be insufficient to explain observed falling emissions in rich countries.