Regional Differences in the Dynamic Linkage between CO2 Emissions, Sectoral Output and Economic Growth

Environmental degradation measured by CO2 emissions is a significant challenge to sustainable economic development. Owing to significant differences in the empirical relationship between the economic growth and CO2 emissions and policies adopted by different countries to overcome the challenge are not decisive. This study aims to generalize our knowledge about the relationship between CO2 emissions and economic growth across the world for 1980-2009 period. Besides, it explores whether the transformation of different economies (e.g. agrarian to industrial and industrial to sophisticated service economy) over the past few decades yielded any significant positive impact towards sustainable economic development by reducing the level of CO2 emission. Empirical results suggest (i) except for high-income-countries, Environmental Kuznets Curve (EKC) is a general phenomenon across the world, and (ii) the transformation of different economies towards a service economy has produced more pollution in high income countries and less pollution in low and middle income countries.