The environmental Kuznets curve at different levels of economic development: a counterfactual quantile regression analysis for CO2 emissions

Abstract

This paper applies the quantile fixed effects technique in exploring the CO2 environmental Kuznets curve within two groups of economic development (OECD and non-OECD countries) and six geographical regions – West, East Europe, Latin America, East Asia, West Asia and Africa. A comparison of the findings resulting from the use of this technique with those of conventional fixed effects method reveals that the latter may depict a flawed summary of the prevailing income–emissions nexus depending on the conditional quantile examined. The paper also extends the Machado and Mata decomposition method to the Kuznets curve framework to explore the most important explanations for CO2 emissions gap between OECD and non-OECD countries. We find a statistically significant OECD--non-OECD emissions gap and the decomposition reveals that there are non-income related factors working against the non-OECD group's greening. We tentatively conclude that deliberate and systematic mitigation of current CO2 emissions in the non-OECD group is required.