The rise and fall of fossil fuels: convergence or industrialization?

We challenge conventional explanations of the Environmental Kuznets Curve (EKC) by demonstrating that changes in emission intensity, not GDP growth, drive its shape. Using novel historical data on CO2 and SO2 emissions, we develop a multi-sector general equilibrium model incorporating both structural transformation and capital accumulation. Our model, calibrated to UK data from 1560-2001, accurately reproduces observed patterns in sectoral shifts, cap- ital accumulation, and emission intensity. Counterfactual simulations reveal that structural transformation, not capital accumulation, is the primary force behind the hump-shaped emission intensity curve - accounting for around two- thirds of the observed hum-shaped pattern. These findings have far-reaching implications for the role of economic growth on emissions and associated cli- mate policy.