Economic Growth, Fossil Fuel Consumption and Persistent Thermal Hotspots

This paper investigates the relationship between economic development and the formation of thermal hotspots, defined as areas of geographically concentrated thermal pollution associated with fossil‐fuel use. A novel measure of potential thermal energy is developed from the higher heating values of fossil fuels. A spatial error‐correction framework examines the relationship between economic development and thermal pollution across 95 countries, accounting for spatial interdependence. The findings reveal significant spatial dependence in thermal pollution across neighbouring countries in both the short and long runs. Thermal pollution and economic development, measured by GDP per capita, exhibit an inverted‐U relationship, consistent with the environmental Kuznets curve. Innovation, measured by patents per capita, is positively associated with thermal pollution in the long run, potentially reflecting productivity gains, lower production costs and rebound effects rather than improvements in energy efficiency. Trade openness is positively associated with thermal pollution in the short run, potentially reflecting increased fossil‐fuel consumption in transportation and logistics. The long‐term consequences of persistent thermal hotspots remain uncertain. The Precautionary Principle suggests a proactive approach to mitigation. Policy recommendations include regional coordination to improve fossil‐fuel efficiency, policies that align economic growth with energy efficiency and incentives for technologies with smaller thermal footprints.