Investigating the environmental Kuznets curve hypothesis for CO 2 emissions in Nordic countries

Abstract

ABSTRACTThis paper examines the environmental Kuznets curve (EKC) hypothesis in Nordic countries (Denmark, Finland, Iceland, Norway and Sweden) over the period 1981–2018. The link between economic growth and carbon dioxide (CO2) emissions is analysed. The study includes causality analysis and controls for cross-sectional dependence (CSD), slope heterogeneity, stationarity and cointegration patterns. Estimations validate the EKC hypothesis for Denmark and Iceland, but not for Norway and Sweden. Finland data show no significantly visible trend.KEYWORDS: CO2EKCCSDheterogeneitycausalityNordic Disclosure statementNo potential conflict of interest was reported by the author(s).Notes1. The Nordic countries have been included in the developed, OECD, Arctic and ‘highly innovative’ country-clusters in previous studies, however.2. Carbon dioxide, nitrous oxide, methane, sulphur hexafluoride, fluorinated gases are some of the GHGs.3. The studies of Dogan et al. [Citation3], Koçak and Ulucak [Citation70], Destek and Sarkodie [Citation45], Allard et al. [Citation9] were also followed to build the econometric model.4. These models generally represent an IPAT approach, (i.e., Influence = Population, Affluence, and Technology) originally introduced by Ehrlich and Holdren [Citation71] but later reformulated by Rosa and Dietz [Citation49].5. Many studies have also included a cubic term of Y (i.e., Y3) to check whether the EKC curve is N-shaped.6. Balsalobre-Lorente and Álvarez-Herranz [Citation72] and Allard et al. [Citation9] suggest that the EKC will adopt different shapes as follows: (i) β1 = β2 = 0 ⇒ Either no link between environmental degradation and income or a flat pattern, (ii) β1 >0 and β2 = 0 ⇒ Environmental degradation increases with income monotonically, (iii) β1 <0 and β2 = 0 ⇒ Environmental degradation increases with income monotonically, (iv) β1 >0 and β2 <0 ⇒ The classical inverted U-shaped EKC, and (v) β1 <0 and β2 >0 ⇒ A U-shaped relation between environmental degradation and income.7. StataMP 18 and various user-written routines of this programme were used for the empirical analysis. All of these results are reproducible. Data and software commands are available upon request.8. The feedback hypothesis suggests that if sustainable management options are adopted in the production and consumption of natural resources, the rate of natural resource depletion and environmental stress declines.