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Economic Change and Restructuring

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10-01-2023

Economic growth and pollutant emissions: new panel evidence from the union for the Mediterranean countries

Authors: Mouna Ben Abdeljelil, Christophe Rault, Fateh Belaïd

Published in: Economic Change and Restructuring | Issue 3/2023

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Abstract

This paper investigates the existence of an environmental Kuznets curve (EKC) and its robustness using data from the Union for the Mediterranean (UfM) countries over the 1970–2020 period. Our methodology relies on four recent estimation methods for non-stationary panel data and includes four pollutants. Two main results emerge from our analysis. First, the EKC does not hold for most pollutants, and its validity crucially depends on the estimation techniques considered. Second, the Pooled-Mean Group method is the most favourable one and confirms the existence of an inverted U-shaped relationship for CO2 and SO2. Our results provide beneficial information for decision-makers. They suggest implementing proactive instruments based on both flexible regulations and tax incentives to stimulate ecological transition.

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Mediterranean Experts on Climate and Environmental Change (MedECC): https://www.medecc.org/

For comparison purpose, we use the estimators of the Mean Group (MG) of Pesaran and Smith (1995), those of the augmented mean group (AMG) of Eberhardt and Eal (2010), and those of the correlated common effects mean group (CCEMG) of Pesaran (2006).

The UfM initially included 44 countries before Syria suspended its participation on November 30, 2011, due to EU sanctions. Libya has the observer status at the UfM.

Business development, improvement of the quality of higher education and scientific research, civil and social affairs, transport and urban development, energy and action for the climate and water and environment.

The only econometric study testing for the EKC hypothesis in the UfM region is that of Sebri (2009), which analyses the trajectory of CO₂ according to per capita income over the 1980–2005 period. Using three different models (linear, log-linear, and semi-log-linear), he confirms the EKC hypothesis for UfM countries.

Countries are Bulgaria, Croatia, Estonia, Hungary, Iceland, Latvia, Lithuania, Macedonia, Malta, Romania, Slovak Republic, Czech Republic, Romania, Slovenia, and Turkey.

Additional estimations including a larger number of control variables (such as Kaufman's governance indicators, urbanization, education, energy intensity, electricity consumption, agriculture (% of GDP), industry (% of GDP)) were also carried out without fundamentally changing the results. Therefore, not to overload tables, we limit ourselves thereafter to these four control variables.

The GDP, ENERG, DPOP OP_TRA variables come from the World Bank database. FDI is taken from the database of the United Nations Conference on Trade and Development (UNCTAD).

Note that the increase in temperatures is not directly considered in the estimated equation and could be a common factor modifying the impact of growth on pollution. The main reason is that we do not have data on the evolution of temperatures. In addition, it is likely that given our relatively short time series analysis, the temperature evolution is not important enough to significantly impact this relationship. However, this aspect is considered indirectly by introducing temporal effects in the econometric specification.

Some UfM countries had to be eliminated from the sample during estimations due to the unavailability of data and geopolitical wars in some regions which suspended their membership, or if countries have had the observer status. See Table 9 for the list of selected countries.

Other second-generation panel unit root tests (not reported here) have also been implemented, especially those of Bai and Ng (2004), Moon and Perron (2004), and Smith et al. (2004), without changing the conclusions.

See Appendix 4 for a brief overview of each method.

The EKC hypothesis is empirically verified only if the estimated coefficients of the income per capita (GDP) and the income per capita squared (GDP²) are respectively positive and negative (and significant).

See for instance Dijkraaf and Vollebergh (2005), or Galeotti et al. (2006).

Germany, Italy, France, Spain, United Kingdom, Netherlands, Poland, and Turkey.

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Title: Economic growth and pollutant emissions: new panel evidence from the union for the Mediterranean countries
Authors: Mouna Ben Abdeljelil
Christophe Rault
Fateh Belaïd
Publication date: 10-01-2023
Publisher: Springer US
Published in: Economic Change and Restructuring / Issue 3/2023
Print ISSN: 1573-9414
Electronic ISSN: 1574-0277
DOI: https://doi.org/10.1007/s10644-022-09476-3

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