Quantile connectedness between CO2 emissions and economic growth in G7 countries

Motivated by the importance and implications of COP26, we study the interrelationship between CO2 emissions and economic growth in G7 countries. For this aim, we employ the quantile-vector autoregression approach to investigate the distributional asymmetric interdependence that exists between emissions and growth over a period of 202 years ranging from 1820Q1 to 2021Q4. The covered period is long and includes several episodes of turmoil that lead to discrepancies in the results when using regression analysis based on the median. Our main findings show that the dependence structure between environment degradation and economic growth is mainly asymmetric and time-varying. Spillovers between CO2 emissions and economic growth are characterized by quantile asymmetry and heterogeneity among the group of G7 countries. We underline the two-way linkage between CO2 emissions and economic growth. CO2 emissions is in most a net transmitter in North America region (USA and Canada) at the beginning of the study period (before 1850) and the end of the period (after year 2000) whereas it shows different patterns in Europe (UK, Italy, France, Germany) and Japan where CO2 emissions is in most a net receiver at the beginning of the study period and a net transmitter at the end of the study period.