Fact or Fiction: The Relationship between Carbon Linkage and Carbon Dioxide Environmental Kuznets Curve

This study tested for cross-sectional dependencies between carbon dioxide (CO2) emissions and per capita gross domestic product (GDP) among countries in four regions: Africa, America, Asia, and Europe. When cross-sectional correlations are identified in a group of countries, panel data regression with common factors proposed by Pesaran (2006) is used to determine whether the environmental Kuznets curve (EKC) hypothesis is supported for CO2 emissions in the respective regions. The empirical results show that a cross-sectional dependency is only absent among African countries and that crosssectional dependencies are significant among the countries in Europe, Asia, and America. The primary factors responsible for such crosssectional correlations are regional carbon leakage and GDP growth. ∗Corresponding author: Chien-Ho Wang, Department of Economics, National Taipei University, 3F36 Social Science Building, 151 University Road, San Shia, Taipei county, 237, Taiwan ROC, Email [email protected]. †Institute of Economics, Academia Sinica, 115 NanKang Taipei Taiwan ROC, Email: [email protected]. ‡Department of Economics, Chinese Culture University, 55, Hwa-Kang Road , 111 Taipei Taiwan ROC, Email [email protected]. §Department of Economics, National Taipei University, 3F36 Social Science Building, 151 University Road, San Shia, Taipei county, 237, Taiwan ROC, Email: [email protected].