What Are the Carbon Emissions Elasticities for Income and Population? Bridging STIRPAT and EKC via robust heterogeneous panel estimates

Knowledge of the carbon emissions elasticities of income and population is important both for climate change policy/negotiations and for generating projections of carbon emissions. However, previous estimations of these elasticities using the well-known STIRPAT framework have produced such wide-ranging estimates that they add little insight. This paper presents estimates of the STIRPAT model that address that shortcoming, as well as the issues of cross-sectional dependence, heterogeneity, and the nonlinear transformation of a potentially integrated variable, i.e., income. Among the findings are that the carbon emissions elasticity of income is highly robust; and that the income elasticity for OECD countries is less than one, and likely less than the non-OECD country income elasticity, which is not significantly different from one. By contrast, the carbon emissions elasticity of population is not robust; however, that elasticity is likely not statistically significantly different from one for either OECD or non-OECD countries. Lastly, the heterogeneous estimators were exploited to reject a Carbon Kuznets Curve: while the country-specific income elasticities declined over observed average income-levels, the trend line had a slight U-shape.