Testing for Convergence in Carbon Dioxide Emissions using a Bayesian Robust Structural Model
WTI Working Paper 01/2017, by Octavio Fernández-Amador, Doris Oberdabernig, and Patrick Tomberger. This paper has been published in Environmental and Resource Economics.
We address international convergence in Carbon Dioxide emissions per capita and per value added derived from emission inventories based on production and consumption patterns. We propose a Bayesian structural model that accounts for heteroscedasticity, endogeneity between emissions and economic growth, and tests for the existence of group-specific convergence via shrinkage priors.
We find evidence for country- specific conditional convergence in all emission inventories, implying a half-life of 2.8 - 3.1 years for emissions per capita and 3.2 - 5 years for emission intensities. When testing for global convergence without allowing for individual-specific convergence paths, the half-life of CO2 intensities increases to 20 - 24 years, whereas emissions per capita do not show convergence towards global steady states. Our results highlight the current incompatibility between emission targets and economic growth and the need for greener technologies. Moreover, there is no evidence for specific convergence dynamics in the European Union, the OECD, or the countries that rati ed the Kyoto Protocol. The institutional frameworks implemented in industrialized countries did not induce faster convergence among developed economies.