Economic growth and carbon emissions: evidence from CIVETS countries

ABSTRACT

This paper examines whether a long-run relationship exists between CO₂ emissions and selected variables: real gross domestic product per capita, inward stock of foreign direct investments, gross fixed capital formation, industry, value added and energy use per capita for Colombia, Indonesia, Viet Nam, Egypt, Turkey and South Africa countries in the period of 1989–2016. We used panel unit root testing, followed by panel cointegration tests and panel causality. The results clearly prove the existence of a bidirectional long-run causal relationship between all the variables except between CO₂ emissions and GDP and CO₂ emissions and GFCF. Major finding of the short-run causality analysis is that CO₂ emission in the short run does not result in changes of other variables. On the other hand, all variables except foreign direct investments (FDI) cause the changes in the CO₂ emissions, and there is a positive bidirectional causal relationship between GDP and FDI, between GFCF and FDI, and between GFCF and IVA. Finally, positive unidirectional causal relationship also exists, running from GDP to IVA, GDP to ENUSE, IVA to FDI and ENUSE to FDI.     

Stochastic convergence of per capita carbon dioxide emissions and multiple structural breaks in OECD countries

This research applies an innovative panel data stationarity testing procedure developed by Carrion-i-Silvestre et al. [Carrion-i-Silvestre, J.L., Barrio-Castro, T.D. and Lopez-Bazo, E., 2005. Breaking the panels: An application to the GDP per capita, Econometrics Journal 8, 159–175.], which has the advantage of recognizing multiple structural breaks and the presence of cross-section dependence in order to re-investigate the hypothesis that per capita carbon dioxide (CO₂) emissions stochastically converge for 21 OECD countries from 1950 to 2002. Remarkably, the evidence clearly indicates that the panel dataset of relative per capita CO₂ emissions is stationary after the structural breaks and cross-sectional dependence are introduced into the model. These findings offer strong policy implications for governments, regardless of whether they are in “convergent group” or “divergent group” countries. We also find that the structural breaks in the 1960s and over the 1970–1982 period are associated with time periods of fossil fuel becoming the main source of productivity, higher oil prices, and the development of nuclear power.     

The impact of population on CO<Subscript>2</Subscript> emissions: evidence from European countries

This paper analyses the impact of population growth on CO₂ emissions in European Union countries. Traditionally, researchers have assumed a unitary elasticity of emissions with respect to population growth. In this study population is treated as a predictor in the model, instead of being included as part of the dependent variable (per capita emissions), thus relaxing the above-mentioned assumption of unitary elasticity. We also contribute to the existing literature by taking into account the presence of heterogeneity in the sample and considering a dynamic specification. The sample covers the period 1975–1999 for the current European Union members. Our results show that the impact of population growth on emissions is more than proportional for recent accession countries whereas for old EU members, the elasticity is lower than unity and non significant when the properties of the time series and the dynamics are correctly specified. The different impact of population change on CO₂ emissions for the current EU members should therefore be taken into account in future discussions of climate change policies within the EU.      

The relationship between temperature and CO2 emissions: evidence from a short and very long dataset

The debate regarding rising temperatures and CO₂ emissions has attracted the attention of economists employing recent econometric techniques. This article extends the previous literature using a dataset that covers 800?000 years, as well as a shorter dataset, and examines the interaction between temperature and CO₂ emissions. Unit root tests reveal a difference between the two datasets. For the long dataset, all tests support the view that both temperature and CO₂ are stationary around a constant. For the short dataset, temperature exhibits trend-stationary behaviour, while CO₂ contains a unit root. This result is robust to nonlinear trends or trend breaks. Modelling the long dataset reveals that while contemporaneous CO₂ appears positive and significant in the temperature equation, including lags results in a joint effect that is near zero. This result is confirmed using a different lag structure and Vector Autoregressive (VAR) model. A Generalized Method of Moments (GMM) approach to account for endogeneity suggests an insignificant relationship. In sum, the key result from our analysis is that CO₂ has, at best, a weak relationship with temperature, while there is no evidence of trending when using a sufficiently long dataset. Thus, as a secondary result we highlight the danger of using a small sample in this context.     

The causal dynamics between renewable energy,real GDP,emissions and oil prices: evidence from OECD countries

This study extends the empirical literature on the determinants of renewable energy consumption in the case of 25 OECD countries for the period 1980–2011. Preliminary analysis suggests the presence of cross-sectional dependence within the panel data. As a result, second-generation panel unit root tests of Smith et al. (2004) and Pesaran (2007) are undertaken to find the respective variables that are integrated of order one. Panel cointegration and error correction modelling reveal that a long-run relationship exists between renewable energy consumption per capita, real GDP per capita, carbon dioxide emissions per capita and real oil prices. The long-run elasticity estimates are positive and statistically significant for real GDP per capita, carbon dioxide emissions per capita and real oil prices. The panel error correction model shows that a feedback relationship exists among the variables.     

Localized innovation, localized diffusion and the environment: an analysis of reductions of CO2 emissions by passenger cars

We investigate technological change with regard to CO₂ emissions by passenger cars, using a Free Disposal Hull methodology to estimate technological frontiers. We have a sample of cars available in the UK market in the period 2000–2007. Our results show that the rates of technological change (frontier movement) and diffusion (distance to frontier at the car brand level) differ substantially between segments of the car market. We conclude that successful policies should be aimed at the diffusion of best-practice technology, and take account of the different potential for further progress between different segments of the market (e.g. diesel vs. gasoline engines and small vs. large engines).

Adoption of digital repositories for CO2 emissions reduction: the case of Korea

This study aims to estimate the potential economic benefits, energy and CO₂ emissions reductions when using trusted third-party digital repository (TTPR) services in one individual bank, and within the banking industry in Korea. First, the cost, benefit and net benefit of using TTPR services in the banking industry are estimated. Second, the net induced output effect is estimated. Third, based on an environmentally extended input–output analysis, CO₂ emissions reduction was estimated as 1924.32 tons in 2009 and the energy consumption reduction as 640.70 TOE. Fourth, the total economic benefit, which is the sum of the net induced output effect and economic value of CO₂ emissions reductions, is approximately $11.04 million. The findings demonstrate that energy consumption and CO₂ emissions reductions are meaningful enough to result in significant economic benefits. Therefore, the Korean government should promote the use of TTPR services in the entire industry.     

Revisiting the environmental kuznets curve hypothesis: evidence from the ASEAN-5 countries with structural breaks

This paper tests if the Environmental Kuznets Curve (EKC) hypothesis exists for ASEAN-5 countries in an annual sample data that covers 1971–2013, by utilizing Auto Regressive Distributed Lag (ARDL) methodology. The empirical findings give support for the EKC hypothesis for Thailand only, after considering the structural breaks. Furthermore, the paper tests the EKC hypothesis for a panel data of the ASEAN-5 by adopting the Pooled Mean Group (PMG) methodology. The results show that the long-run estimates provide no evidence for the EKC hypothesis. Finally, the paper examines the causality between the CO₂ emissions and GDP. For individual countries, bidirectional causality was found in the case of Thailand and Malaysia, plus unidirectional causality running from GDP and squared GDP to CO₂ emissions was found for Indonesia, but a unidirectional causality running from CO₂ emissions to GDP and squared GDP was found for the Philippines, however, no causality effect was found for Singapore. Furthermore, the pairwise Dumitrescu and Hurlin Panel Causality test show a bidirectional effect between CO₂ emissions and both GDP in addition to squared GDP.     

Input-output subsystems and pollution: An application to the service sector and CO2 emissions in Spain

The analysis of input-output subsystems provides a useful tool for studying the productive structure of the different sectors of an economy. In this paper we develop this analysis to the study of the CO₂ emissions associated to the group of branches of the service sector. The decomposition of the total production of the services subsystem allows us to decompose the CO₂ emissions into five different components (own, demand volume, feed-back, internal and spill over components). From the results obtained, we can highlight the different roles played by the different branches of services. Transport activities are the services with the highest level of the direct emissions generated in the production of the sector. These activities are required by the other sectors of the economy to a greater degree than they are for their own final demand. Therefore, the production sold to other sectors causes more emissions than its own final demand. However, in the case of other service activities, direct and indirect emissions related to final demand are much more important, due to the strong pull effect of service activities on other activities of the economy. In this respect, Wholesale and retail trade, Hotels and restaurants, Real estate, renting and business activities, and Public administration services should be highlighted. These services receive scarce attention in the design of policies aimed at reducing emissions, but are notably responsible for the major increase in emissions experienced in recent years.     

The control of CO2 emissions and its economic impact: An AGE model for a german state

Since it is believed that CO₂ is responsible for 55% of the greenhouse effect, a CO₂ levy is now under consideration in several countries. For an assessment of the macroeconomic implications of an integrated energy and environmental policy we employ an applied general equilibrium model (AGE) since all sectors of an economy and all private households contribute to CO₂ emission. Our model is a temporary equilibrium model with capacity extension under adjustment costs and with abatement activities for SO₂ and NO_x emissions.The model of consumer behavior will result in a system of consumer demand functions for non-durables as well as for durable goods. The simulations show the cost of inefficiency in resource allocation if CO₂ taxes differ between industries and households. We finally present the marginal cost curve of CO₂ emission reduction.     

Structural decomposition analysis and input-output subsystems: Changes in CO2 emissions of Spanish service sectors (2000-2005)

The analysis of gas emissions by an input-output subsystem approach provides detailed insight into pollution generation in an economy. Structural decomposition analysis, on the other hand, identifies the factors behind the changes in key variables over time. Extending the input-output subsystem model to account for the changes in these variables reveals the channels by which environmental burdens are caused and transmitted throughout the production system. In this paper we propose a decomposition of the changes in the components of CO₂ emissions captured by an input-output subsystems representation. The empirical application is for the Spanish service sector, and the economic and environmental data are for years 2000 and 2005. Our results show that services increased their CO₂ emissions mainly because of a rise in the emissions generated by non-services to cover the final demand for services. The decomposed effects show a decrease in CO₂ emissions due to technological changes between 2000 and 2005 compensated by an increase in emissions caused by the rise in final demand of services. Finally, large asymmetries exist not only in the quantitative changes in the CO₂ emissions of the various services but also in the decomposed effects of these changes.     

Economic Growth and CO2 Emissions in the European Union

This paper examines the relationship between economic growth and CO₂ emissions in the European Union. A panel data analysis for the period 1981 to 1995 is applied in order to estimate the relationship between Gross Domestic Product (GDP) growth and CO₂ emissions in ten selected European countries. The analysis shows important disparities between the most industrialised countries and the rest. The results do not seem to support a uniform policy to control emissions; they rather indicate that a reduction in emissions should be achieved by taking into account the specific economic situation and the industrial structure of each EU member state.     

Openness and the Environmental Kuznets Curve: Evidence from China

This paper investigates the relationship in China between trade, growth and emissions using provincial-level data for water (chemical oxygen demand: COD) and air (sulphur dioxide: SO₂). It analyses the period 1990–2007 in three steps. First, the income ‘turning point’ of the Environmental Kuznets Curve (EKC) has been estimated using quadratic log function and obtained a turning point consistent with existing studies. Second, adopting Dean's (2002) simultaneous equations system, the relationships between trade, growth and emissions has been estimated and the results confirm the dominance of scale effects over technique effects. Third, the estimated per capita turning point for EKC is used to split the provincial industrial database into two groups (below and above turning point income) and simultaneous equations are estimated separately for them. The split sample provided limited support for the trade-induced emissions hypothesis for COD, but not for SO_2. At the provincial level rising incomes via increased levels of international trade were associated with falling COD due to the technique effect, so that rising incomes among the provinces tended to be associated with lower emissions. Stricter environmental regulations are required for growing incomes because they may encourage better production techniques.     

Can innovation shocks determine CO2 emissions (CO2e) in the OECD economies? A new perspective

ABSTRACT

This study has attempted to address prior knowledge gaps in the environmental economics literature by integrating the innovation shocks into the Environment Kuznets Curve (EKC) equation for twenty-six OECD economies using data from 1990 to 2014. Foreign direct investment (FDI), exports (EXP), renewable energy consumption (REC), and GDP per capita were included as control variables. The results from multiple empirical analyses indicated that positive shocks to innovation improve, but the negative shocks disrupt environmental quality. Data analyses also showed that a positive correlation exists between income per capita of OECD economies. From the negative coefficient of income per capita (squared) and the existence of a negative nexus between FDI and CO2e, both the EKC and the Pollution Halo Hypothesis (PHH) were confirmed in sampled economies, respectively. The paper offers empirical support for the favourable impacts of REC on the quality of the environment and calls for the adoption of innovation shocks as a policy instrument to formulate better environmental policies for a sustainable future.     

Net national emissions, CO2 taxation and the role of forestry

The concept of net national emissions suggests that accumulation of carbon in forestry should be taken into account when countries buy CO₂ permits or pay CO₂ taxes. The paper analyses the question of the correct tax/subsidy programme for giving proper incentives to forest owners and utilizers of wood. The analysis uses a dynamic general equilibrium model with productive capital and the stock of forests as state variables. It turns out that in a decentralized economy forest owners should be subsidized and CO₂ emissions should be taxed independently of whether they originates from wood or fossil fuels.     

Norwegian Emissions of CO2 1987–1994 A Study of Some Effects of the CO2 Tax

Several countries have introduced taxes on fossil fuels with the aim of reducing atmospheric emissions, partly because of local environmental goals (SO₂, NO_x) and partly to participate in a global effort to reduce emissions of greenhouse gases. Many macroeconomic studies, based on both global and national models, have been made of how emissions can be reduced with the help of taxes and the consequent reduction in GDP following the introduction of such taxes. Norway has had a CO₂ tax for five years, thereby providing a unique opportunity to evaluate the effects of this tax on emissions. The paper provides a counterfactual analysis of energy consumption and emissions if no CO₂ taxes had been introduced, compared with the actual situation in which such taxes exist. The effect of a CO₂ tax on oil consumption, and thus CO₂ emissions is studied on the basis of partial economic models for various sectors of the Norwegian economy. The study indicates that the CO₂ tax has had an impact on CO₂ emissions in Norway.     

Decomposing the decoupling of CO2 emissions and economic growth in Brazil

This paper examines the occurrence of a decoupling between the growth rates in economic activity and CO₂ emissions from energy consumption in Brazil from 2004 to 2009. This decoupling was highlighted when economic activity and CO₂ emissions moved in opposite directions in 2009. More generally, we observe several periods of relative decoupling in Brazil, but not to the extent witnessed in 2009. To identify the determinants of emissions change, we develop a decomposition model based on a log-mean Divisia index (LMDI) framework. The results indicate that the carbon intensity and energy mix are the main determinant of emissions reduction in Brazil between 2004 and 2009. Modifications in the economy structure are also associated to emission mitigation in the period. Such evidence demonstrates similarities with events of decoupling registered for the interval 1980-1994 in Brazil. Finds from Brazil differ from observations in other countries in which improvement in energy intensity has been the most common determinant of emissions reduction.     

Distribution Dynamics of CO<Subscript>2</Subscript> Emissions

This paper uses nonparametric methods to examine the convergence in CO₂ emissions per capita on a sample of 100 countries for the period 1966–1996. Industrial countries show a convergence pattern. However, there is little evidence of convergence for the whole sample.     

Inflation and real sectoral output shares: Dynamic panel model evidence from seven OECD countries

Models of the cost of inflation often conclude that inflation misallocates resources. For example, inflation may lead to an increase in the variability of relative prices and it is often claimed that this increase in variability leads to a misallocation of resources. This claim raises the following empirical question, does inflation alter the composition of real output; that is, does it change real output shares? We examine this question using dynamic panel data methods for nine sector panels each with seven OECD countries from 1970 to 2005. We find evidence that inflation changes the real shares of some sectors even when inflation is treated as endogenous.