A panel data heterogeneous Bayesian estimation of environmental Kuznets curves for CO2 emissions

This article investigates the Environmental Kuznets Curves (EKC) for CO₂ emissions in a panel of 109 countries during the period 1959 to 2001. The length of the series makes the application of a heterogeneous estimator suitable from an econometric point of view. The results, based on the hierarchical Bayes estimator, show that different EKC dynamics are associated with the different sub-samples of countries considered. On average, more industrialized countries show evidence of EKC in quadratic specifications, which nevertheless are probably evolving into an N-shape based on their cubic specification. Nevertheless, it is worth noting that the EU, and not the Umbrella Group led by US, has been driving currently observed EKC-like shapes. The latter is associated to monotonic income–CO₂ dynamics. The EU shows a clear EKC shape. Evidence for less-developed countries consistently shows that CO₂ emissions rise positively with income, though there are some signs of an EKC. Analyses of future performance, nevertheless, favour quadratic specifications, thus supporting EKC evidence for wealthier countries and non-EKC shapes for industrializing regions.