Benchmarking GHG Emissions Forecasting Models for Global Climate Policy

Climate change and pollution fighting have become prominent global concerns in the twenty-first century. In this context, accurate estimates for polluting emissions and their evolution are critical for robust policy-making processes and ultimately for solving stringent global climate challenges. As such, the primary objective of this study is to produce more accurate forecasts of greenhouse gas (GHG) emissions. This in turn contributes to the timely evaluation of the progress achieved towards meeting global climate goals set by international agendas and also acts as an early-warning system. We forecast the evolution of GHG emissions in 12 top polluting economies by using data for the 1970-2018 period and employing six econometric and machine-learning models (the exponential smoothing state-space model (ETS), the Holt-Winters model (HW), the TBATS model, the ARIMA model, the structural time series model (STS), and the neural network autoregression model (NNAR)), along with a naive model. A battery of robustness checks is performed. Results confirm a priori expectations and consistently indicate that the neural network autoregression model (NNAR) presents the best out-of-sample forecasting performance for GHG emissions at different forecasting horizons by reporting the lowest average RMSE (root mean square error) and MASE (mean absolute scaled error) within the array of predictive models. Predictions made by the NNAR model for the year 2030 indicate that total GHG emissions are projected to increase by 3.67% on average among the world's 12 most polluting countries until 2030. Only four top polluters will record decreases in total GHG emissions values in the coming decades (i.e., Canada, the Russian Federation, the US, and China), although their emission levels will remain in the upper decile. Emission increases in a handful of developing economies will see significant growth rates (a 22.75% increase in GHG total emissions in Brazil, a 15.75% increase in Indonesia, and 7.45% in India) that are expected to offset the modest decreases in GHG emissions projected for the four countries. Our findings, therefore, suggest that the world's top polluters cannot meet assumed pollution reduction targets in the form of NDCs under the Paris agreement. Results thus highlight the necessity for more impactful policies and measures to bring the set targets within reach.