Environmental Kuznets Curve for carbon dioxide emissions: lack of robustness to heterogeneity?

Abstract

This paper focuses solely on the energy consumption, carbon dioxide (CO2) emissions and economic growth nexus applying the iterative Bayesian shrinkage procedure. The environmental Kuznets curve (EKC) hypothesis is tested using this method for the first time in this literature and the results obtained suggest that: first, the EKC hypothesis is rejected for 49 out of the 51 countries considered when heterogeneity in countries' energy efficiencies and cross-country differences in the CO2 emissions trajectories are accounted for; second, a classification of the results with respect to countries’ development levels reveals that an overall inverted U-shape curve is due to the fact that increase in gross domestic product (GDP) in the high-income countries decreases emissions, while in the low-income countries it increases emissions.