The Environmental Kuznets Curve: Examining the relationship between income and technology-adjusted consumption-based CO2 emissions

Abstract: This study aims to investigate whether countries succeed to reduce their contribution to global emissions when countries reach higher levels of income. As a result of rapid changes in international trade, a country’s emission responsibility goes beyond national borders, which should be adequately captured in their carbon footprint. This study discusses that the two conventional accounting measures (production-based and consumption-based emissions) do not adequately reflect how countries contribute to global emissions. Therefore, to examine a country’s global environmental impact, technology-adjusted consumption-based CO2 emissions are considered for the first time to estimate the Environmental Kuznets Curve (EKC) relationship. In addition, this study tests the robustness of the previous found relations based on production and consumption-based emissions. In total, this study considers a sample of 38 countries for the time period of 1995-2009. The results for production-based emissions indicate support for the EKC, while there is a monotonically increasing relationship between income and consumption-based emissions. The main finding of this thesis is an increasing relationship between income and technology-adjusted consumption-based emissions with a turning point of $72767.5, which falls beyond the maximum level of income in the sample. This is worrisome for lowering global emissions in the upcoming decades, which is necessary to achieve sustainable development.