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The relationship among CO2 emissions, electricity power consumption and GDP in OECD countries

Listed author(s):
  • Bella, Giovanni
  • Massidda, Carla
  • Mattana, Paolo

This paper proposes a panel vector error correction model investigation of a quadratic relationship linking CO2 emissions, GDP levels and electric power consumption. We find that two independent long-run relationships emerge from the data. Since the null of homogeneity across units with regard to long-run elasticities is strongly rejected, we proceed by clustering countries according to the signs of the estimated coefficients. The approach allows us to form three groups: in the first there is evidence of an optimistic scenario, where both CO2 emissions and electric power consumption are bound to decrease in the long-run. An optimistic scenario for emissions reduction is also provided in the second cluster where, however, the long-run relationship between income and electric power consumption shows an U-shaped pattern, instead. Finally, the third cluster can be associated with a much worrying scenario where per capita CO2 is expected to grow with income. A joint consideration of long-run parameters and causality links allows us to propose cluster-tailored policy suggestions.

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File URL: http://www.sciencedirect.com/science/article/pii/S016189381400088X
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Article provided by Elsevier in its journal Journal of Policy Modeling.

Volume (Year): 36 (2014)
Issue (Month): 6 ()
Pages: 970-985

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Handle: RePEc:eee:jpolmo:v:36:y:2014:i:6:p:970-985
DOI: 10.1016/j.jpolmod.2014.08.006
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505735

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