Using the Box-Cox transformation to approximate the shape of the relationship between CO2 emissions and GDP: a note

With CAIT WRI data for those countries which submitted quantifiable CO2 emission caps under the Copenhagen Agreement, this note supports the existence of a long run relationship between CO2 emissions and GDP in 11 of the 26 countries in our sample over the period 1980-2008. However, the functional specification of that relationship is not homogenous among nations, being linear for 2 countries, log-log for 2 other cases, while the relationship follows a Box-Cox functional form for 7 nations. Elasticities of the emissions-income relationship also differ among counties. But in most cases (8 out of 11), the magnitude of the average elasticity is less than 1 (emissions increase less than GDP).