Thursday, July 21, 2016

Dynamics of the Environmental Kuznets Curve

Just finished writing a survey of the environmental Kuznets curve (EKC) for the Oxford Research Encyclopedia of Environmental Economics. Though I updated all sections, of course, there is quite a bit of overlap with my previous reviews. But there is a mostly new review of empirical evidence reviewing the literature and presenting original graphs in the spirit of IPCC reports :) I came up with this new graph of the EKC for sulfur emissions:

The graph plots the growth rate from 1971 to 2005 of per capita sulfur emissions in the sample used in the Anjum et al. (2014) paper against GDP per capita in 1971. There is a correlation of -0.32 between the growth rates and initial log GDP per capita. This shows that emissions did tend to decline or grow more slowly in richer countries but the relationship is very weak -  only 10% of the variation in growth rates is explained by initial GDP per capita. Emissions grew in many wealthier countries and fell in many poorer ones, though GDP per capita also fell in a few of the poorest of those. So, this does not provide strong support for the EKC being the best or only explanation of either the distribution of emissions across countries or the evolution of emissions within countries over time. On the other hand, we shouldn't be restricted to a single explanation of the data and the EKC can be treated as one possible explanation as in Anjum et al. (2014). In that paper, we find that when we consider other explanations such as convergence the EKC effect is statistically significant but the turning point is out of sample - growth has less effect on emissions in richer countries but it still has a positive effect.

The graph below compares the growth rates of sulfur emissions with the initial level of emissions intensity. The negative correlation is much stronger here: -0.67 for the log of emissions intensity. This relationship is one of the key motivations for pursuing a convergence approach to modelling emissions. Note that the tight cluster of mostly European countries that cut emissions the most appears to have had both high income and high emissions intensity at the beginning of the period.

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