A panel estimation of the relationship between income, electric power consumption and CO2 emissions

Bellla, Gianni and Massidda, Carla and Etzo, Ivan (2010): A panel estimation of the relationship between income, electric power consumption and CO2 emissions.

Abstract

This paper aims to give a contribution on the still questioned bell-shaped relationship between carbon dioxide polluting emissions and economic growth, which is commonly known in the literature as the Environmental Kuznets Curve hypothesis. In particular, it develops a panel analysis for a group of 77 countries, including 22 OECD and 55 NON-OECD units, over the period 1971-2006. We specify the estimated model by taking into account the role of electric power consumption and compare the performance of alternative panel estimators for a quadratic and cubic specification of the empirical model. Our findings seem to go in favor of the EKC relationship for the entire sample. However, this outcome is not confirmed when moving the analysis at sub-sample level where results highlight a non homogeneous picture across different groups of nations.

• Item Type: MPRA Paper
• Language: English
• Keywords: Panel analysis, Environmental Kuznets Curve, CO2 emissions and Energy use
• Subjects: C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C33 - Panel Data Models ; Spatio-temporal Models; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q5 - Environmental Economics > Q54 - Climate ; Natural Disasters and Their Management ; Global Warming; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q4 - Energy > Q43 - Energy and the Macroeconomy

References

Aslanidis, N. (2009). “Environmental Kuznets Curves for Carbon Emissions: A Critical Survey”. FEEM Working Paper, 75.

Apergis, N. and Payne, J. (2009). “CO2 emissions, energy usage and output in Central America”. Energy Policy, 37, 3282-3286.

Azomahou, T., Laisney, F. and Van, P. N. (2006). “Economic development and CO2 emissions: A nonparametric panel approach”. Journal of Public Economics, 90, 1347-1363.

Baltagi, B. H., Bresson, G. and Pirotte, A. (2004). “Tobin q: forecast performance for hierarchical Bayes, shrinkage, heterogeneous and homogeneous panel data estimators”. Empirical Economics, 29, 107-113.

Baltagi, B. H., Griffin, J. M. and Xiong, W. (2002). “Comparison of forecast performance for homogeneous, heterogeneous and shrinkage estimators: Some empirical evidence from US electricity and natural-gas consumption”. Economic Letters, 76, 375-382.

Baltagi, B. H., Griffin, J. M. and Xiong, W. (2000). “To pool or not to pool: Homogeneous versus heterogeneous estimators applied to cigarette demand”. Review of Economics and Statistics, 82, 117-126.

Beltratti, A. (1997). “Sustainable Use of Renewable Resources”. In Chichilnisky, G., Heal, G. and Vercelli, A. (eds), Environmental Economics: Growth and Uncertainty, Kluwer Academic Publisher.

Cole, M. A. (2005). “Re-Examining the Pollution-Income Relationship: A Random Coefficient Approach”. Economics Bulletin, 14, 1-7.

Copeland, B. R. and Taylor, M. S. (2004). “Trade, growth and the environment”. Journal of Economic Literature, 42, 7-71.

de Bruyn, S. M., van den Bergh, J. C. J. M. and Opschoor, J. B. (1998). “Economic growth and emissions: Reconsidering the empirical basis of environmental Kuznets curves”. Ecological Economics, 25, 161-175.

Dinda, S. (2004). “Environmental Kuznets Curve Hypothesis: A Survey”. Ecological Economics, 49, 431-455.

Dinda, S., Coondoo, D. and Pal, M. (2000). “Air quality and economic growth: an empirical study”. Ecological Economics, 34(3), 409-423.

Ferda, H. (2009). “An econometric study of CO2 emissions, energy consumption, income and foreign trade in Turkey”. Energy Policy, 37(3), 1156-1164.

Figueroa E. B. and Pastén, R. C. (2009). “Country-specific Environmental Kuznets Curves: a Random Coefficient approach applied to high-income countries”. Estudios de Economia, 36(1), 5-32.

Galeotti, M., Manera, M. and Lanza, A. (2009). “On the Robustness of Robustness Checks of the Environmental Kuznets Curve Hypothesis”. Environmental & Resource Economics, 42(4), 551-574.

Grossman, G. M. and Krueger, A. B. (1995). “Economic growth and the environment”. Quarterly Journal of Economics, 110, 352-377.

Hausman, J. A. (1978). Specification Tests in Econometrics. Econometrica, 46, 1251-1271. Holtz-Eakin, D., and Selden, T. M. (1995). “Stoking the fires? CO2 emissions and economic growth”. Journal of Public Economics, 57, 85-101.

Hsiao, C., M.H. Pesaran and A.K. Tahmiscioglu, Bayes estimation of short-run coefficients in dynamic panel data models. In: C. Hsiao, K. Lahiri, L.-F. Lee and M.H. Pesaran, Editors, Analysis of Panels and Limited Dependent Variable Models, Cambridge University Press, Cambridge (1999), pp. 268–296.

Im, K. S., Pesaran, M. H., and Shin Y. (2003). “Testing for Unit Roots in Heterogeneous Panels”. Journal of Econometrics, Vol. 115, p. 53-74.

Koop, G. and Tole, L. (1999). “Is There an Environmental Kuznets Curve for Deforestation?”. Journal of Development Economics, 58, 231-244.

Lean, H. H. and Smyth, R. (2010). “CO2 emissions, electricity consumption and output in ASEAN”. Applied Energy, 87, 1858-1864.

List, J.A. and Gallet, C.A. (1999). “The environmental Kuznets curve: does one size fit all?”. Ecological Economics, 31, 409-423.

Maddala, G.S. and Wu, S. (1999). “A Comparative Study of Unit Root Tests With Panel Data and A New Simple Test”. Oxford Bulletin of Economics and Statistics, 61, 631-652.

Martinez-Zarzoso, I and Bengonchea-Morancho A. (2004). “Pooled mean group estimation of an environmental Kuznets curve for CO2”. Economics Letters, 82, 121-126.

Mazzanti, M. and Musolesi, A. (2009). “Carbon Kuznets Curves: Long-Run Structural Dynamics and Policy Events”. FEEM Working Paper, 87.

Pedroni, P.L. (2004). “Panel Cointegration; Asymptotic and Finite Sample Properties of Pooled Time Series Tests with an Application to the Purchasing Power Parity Hypothesis”, Econometric Theory, 20(3), 597-625.

Pesaran, M. H., Shin, Y. and Smith, R. (1999). “Pooled mean group estimation of dynamics heterogeneous panels”. Journal of the American Statistical Association, 94, 621-634.

Pesaran, M. Hashem and Smith, R. (1995). “Estimating Long-Run Relationships from Dynamic Heterogenous Panels”. Journal of Econometrics, LXVIII, 79-113.

Richmond, A.K., and Kaufmann, R.K. (2006). “Is there a turning point in the relationship between income and energy use and/or carbon emissions?”. Ecological Economics, 56, 176-189.

Selden, T. M. and Song, D. (1994). “Environmental quality and development: is there a Kuznets curve for air pollution?”. Journal of Environmental Economics and Environmental Management, 27, 147-162.

Shafik, N. (1994). “Economic development and environmental quality: an econometric analysis”. Oxford Economic Papers, 46, 757-773.

Stern, D. I. (2004). “The Rise and Fall of the Environmental Kuznets Curve”. World Development, 32(8), 1419-1439.

Stern, D. I. and Common, M. S. (2001). “Is there an environmental Kuznets curve for sulfur?”. Journal of Environmental Economics and Management, 41, 162-178.

Swamy, P. and Mehta, J. S. (1975). “Bayesian and Non-Bayesian Analysis of Switching Regressions and of Random Coefficient Regression Models”. Journal of the American Statistical Association, 70, 593-602.

Westerlund , J. (2007). “ Testing for Error Correction in Panel Data”. Oxford Bulletin of Economics and Statistics, 69, 709-748.

World Bank. World development indicators. Washington (DC): World Bank; 2009.