The relationship between economic growth and carbon emissions in G-7 countries: evidence from time-varying parameters with a long history

This paper re-investigates the time-varying impacts of economic growth on carbon emissions in the G-7 countries over a long history. In doing so, the historical data spanning the period from the 1800’s to 2010 (as constructed) for each country is examined using the time-varying cointegration and bootstrap-rolling window estimation approach. Unlike the previous Environmental Kuznets Curve (EKC) studies, using this methodology gives us avenue to detect more than one, two or more turning points for the economic growth-carbon emissions nexus. The empirical findings show that the nexus between economic growth and carbon emission seems over a long history to be M-shaped for Canada and the UK, N-shaped for France, inverted N-shaped for Germany, and inverted M-shaped (W-shaped) for Italy, Japan and the US. In addition, the possible validity of EKC hypothesis is examined for both the pre-1973 and post-1973 sub-periods. Based on this investigation, we found that an inverted U-shaped is confirmed only for the pre-1973 period in France, Italy and the US. These empirical evidences provide new insights to policy makers to improve environmental quality using economic growth as an economic tool for the long run by observing changes in the environmental impact of this growth from year to year.