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A neural network approach to the environmental Kuznets curve

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  • Bennedsen, Mikkel
  • Hillebrand, Eric
  • Jensen, Sebastian

Abstract

We investigate the relationship between per capita gross domestic product and per capita carbon dioxide emissions using national-level panel data for the period 1960–2018. We propose a novel semiparametric panel data methodology that combines country and time fixed effects with a nonparametric neural network regression component. Globally and for the regions OECD and Asia, we find evidence of an inverse U-shaped relationship, often referred to as an environmental Kuznets curve (EKC), in production-based emissions. For OECD, the EKC-shape disappears when using consumption-based emissions data, suggesting the EKC-shape observed for OECD is driven by emissions exports. For Asia, the EKC-shape becomes even more pronounced when using consumption-based emissions data and exhibits an earlier turning point.

Suggested Citation

  • Bennedsen, Mikkel & Hillebrand, Eric & Jensen, Sebastian, 2023. "A neural network approach to the environmental Kuznets curve," Energy Economics, Elsevier, vol. 126(C).
    • Handle: RePEc:eee:eneeco:v:126:y:2023:i:c:s0140988323004838
    DOI: 10.1016/j.eneco.2023.106985
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    Keywords

    Production-based carbon dioxide emissions; Consumption-based carbon dioxide emissions; Environmental Kuznets curve; Climate econometrics; Panel data; Machine learning; Neural networks;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C45 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Neural Networks and Related Topics
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods

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