I mentioned at a Victorian government symposium a couple of weeks ago the theory of an environmental Kuznets curve – the notion that emissions per capita might rise with incomes until a certain point, and then begin to fall. But Neil Barr at Vic DPI just emailed me an article from Ecological Economics suggesting that we shouldn’t hang our pro-growth hats on it.
Is there a turning point in the relationship between income and energy use and/or carbon emissions?
Amy K. Richmond and Robert K. Kaufmann
We analyze the effect of fuel mix, model specification, and the level of development on the presence and size of a turning point in the relationship between income and energy use and/or carbon emissions. The results indicate that fuel mix, the specification for income, and the level of economic development affect conclusions about whether there is a turning point in the relationship between economic activity and energy use and carbon emissions. Including fuel shares generally reduces the size of a turning point that is estimated from a panel that includes observations from both OECD and Non-OECD nations. But this result varies according to the level of development. For OECD nations, there is limited support for a turning point in the relationship between income and per capita energy use and/or carbon emissions. For non-OECD nations, there is no turning point in the relationship between income and either energy use or carbon emissions. Instead, the relationship is positive. Together, the results indicate that forecasters and policy makers should not depend on a turning point in the relationship between income and energy use or carbon emissions to reduce either.
Richmond and Kaufmann test for "turning points" – the level of GDP per capita at which emissions might start to turn down. But in many of their estimated specifications (such as the one shown in the graph), their estimated turning point is higher than the maximum level of GDP per capita among OECD countries.