Testing for Convergence in Carbon Dioxide Emissions Using a Bayesian Robust Structural Model

Abstract:

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 and 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 2.7–3.1 years for production-based emissions and 3.6–4.7 years for consumption-based emissions. When testing for global convergence without allowing for individual-specific convergence paths, the half-life of CO2 per capita increases to 15–26 years, whereas emission intensities show a half-life of 44–45 years. Our results highlight the current incompatibility between emission targets and economic growth and the need for faster diffusion of green technologies. Moreover, there is no evidence for specific convergence dynamics in the European Union, the OECD, or the countries that are subject to binding emission constraints specified in the Kyoto Protocol. The institutional frameworks implemented in industrialized countries did not induce faster convergence among developed economies.