Modelling Sulphur Emissions in Europe : A Spatial Econometric Approach

Previous authors have described an acid rain game in which countries respond to transboundary depositions of sulphur by adjusting their domestic emissions. Multiple attempts to model environmental Kuznets curves for sulphur emissions over time, however, have ignored the theoretical dependency of emissions on transboundary depositions. This neglect is surprising since in Europe there are numerous examples of countries whose own contribution to domestic depositions is less than the contribution from foreign emissions. Within the context of a long panel of sulphur emissions for European countries it is shown that accounting for transboundary emissions markedly alters the perceived shape of the environmental Kuznets curve. Far more compelling however is a model characterized by a spatial lag in which countries simply track changes in the per capita emissions characteristics of their neighbours irrespective of their per capita income levels