Environmental Kuznets Curve: Non-Linear Panel Regression Analysis

Abstract

This study presents an analysis of the relationship between per capita CO2 emissions as an environmental degradation indicator and per capita gross domestic product (GDP) as an economic growth indicator within the framework of the Environmental Kuznets Curve (EKC). For this purpose, non-linear panel models are estimated for the Annex I countries, non-Annex countries, and whole parties with respect to data availability of the United States Convention on Climate Change (UNFCCC) for the period 1960–2012. The empirical results of the panel smooth transition models (PSTR) show that the environmental deterioration rises in the first phase of growth for all data sets. Afterwards, the environmental degradation cannot be prevented, but the increase in the amount of environmental degradation decreases. The findings of this study give an insight regarding the differential environmental impact of economic growth between developed and developing countries. While the validity of a traditional EKC relation regarding the CO2 emissions cannot be affirmed for any group of countries in our sample, empirical results indicate the existence of multiple regimes where economic growth hampers environmental quality, but its severity decreases at each consecutive regime.