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Exploring the Carbon Kuznets Hypothesis

Author

Listed:
  • Georg Muller-Furstenberger

    (University of Bern)

  • Martin Wagner

    (University of Bern)

  • Benito Muller

    (Oxford Institute for Energy Studies)

Abstract

The Carbon Kuznets hypothesis conjectures an inverse U{shape relation between GDP and carbon dioxide emissions. We investigate a number of empirical problems with this hypothesis by way of both econometric analysis and CGE modelling. The econometric analysis takes into account the possibility of unit root non{stationary regressors. On a panel of 107 countries covering the years from 1986 to 1998 we ¯nd evidence for unit root non{stationarity in log GDP and log emissions. Our discussion therefore focusses of potential pitfalls in estimating the Carbon Kuznets curve in the context of non{stationary panels context. We conclude that current practice in the literature fails to take these potential problems adequately into account. The second conceptual problem considered in the paper is the question of how to inter- pret an observed inverse U{shaped relationship. With the help of a small GCE model, we illustrate the danger of using observed GDP{emission patterns directly as a policy guide. Our model economy, where decarbonization is exogenous, demonstrates in particular that a carbon policy relating to income levels may not be appropriate even in the face of an observed inverse U{pattern between income and emissions.

Suggested Citation

  • Georg Muller-Furstenberger & Martin Wagner & Benito Muller, 2005. "Exploring the Carbon Kuznets Hypothesis," Others 0506009, University Library of Munich, Germany.
  • Handle: RePEc:wpa:wuwpot:0506009
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    References listed on IDEAS

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    Cited by:

    1. Susanne Dröge & Claudia Kemfert, 2005. "Trade Policy to Control Climate Change: Does the Stick Beat the Carrot?," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, vol. 74(2), pages 235-248.
    2. Wagner, Martin, 2008. "The carbon Kuznets curve: A cloudy picture emitted by bad econometrics?," Resource and Energy Economics, Elsevier, vol. 30(3), pages 388-408, August.

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    More about this item

    Keywords

    Carbon Kuznets curve; non{stationary panel; regressions with integrated variables; CGE modelling;
    All these keywords.

    JEL classification:

    • Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General
    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General

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