Carbon dioxide, income and energy: Evidence from a non-linear model

This study applies the panel smooth transition regression (PSTR) model to explore the impacts of real income, energy, and investment on the CO₂-income nexus for 99 countries covering the period from 1971 to 2010. We find that in the full sample, as real income rises, CO₂ emissions rapidly increase first, and then their increasing rate starts to slow down, while the environmental Kuznets curve (EKC) hypothesis for CO₂ emissions is supported from the composite results of three income groups. Our results show that decreasing energy usage, improving energy efficiency, and enhancing clean energy usage could effectively ease the impacts of real income on CO₂ emissions. Moreover, countries with different energy trade conditions and income levels have different CO₂-income correlations, indicating that one size does not fit all. - Highlights: • We explore the non-linear CO₂-income nexus. • The EKC hypothesis is found from the composite results of three income groups. • A small CO₂-income nexus is found in countries with lower energy usage. • The CO₂-income nexus in more energy efficiency and clean energy usage is smaller. • The energy trade conditions and income levels will influence the CO₂-income nexus.