The environmental Kuznets curve within European countries and sectors: greenhouse emission, production function and technology

Abstract

Based on the environmental Kuznets curve (EKC) hypothesis and the technological change and the environment literature, our original contribution consists in analysing within the decomposition model the direct and indirect influence of technological change as well as the energy mix on CO2 emissions. Focusing on the dirtiest sectors of 25 EU countries in the period 1997-2005 and considering the endogeneity issue, we estimate an adjusted EKC relationship comparing a single equation model (univariate model) with a simultaneous equations system (bivariate model). Following Lopez (J Environ Econ Manag 27:163-184, 1994), a second equation is introduced where per capita income is a positive function of conventional factors as labour, capital, and technology. Our findings confirm that a negative relationship between income and CO2 emissions is dominant and seems that only the decreasing branch of the EKC is relevant. As regards the composition effect, emissions of the dirtiest sectors decrease when income increases. The impact of energy/input mix confirms that changing the energy mix may reduce emissions. The technique effects shows that the direct effect of R&D expenditure reduces pollution while the indirect effect is mixed: private R&D reinforces the reduction of emissions, the public spending on R&D instead increases emissions.