Shining a new light on the environmental Kuznets curve for CO2 emissions

This paper examines the existence of an inverted U-shaped relationship between income and CO2 emissions from fossil fuels for a panel of 161 countries over the period 1992–2012. Our contribution, empirical in nature, is threefold. (i) We estimate the Environmental Kuznets Curve for CO2 emissions using three conventional measures of GDP taken from the PWT and the WDI and show that the results of the estimates are unstable and that the turning points are dependent on the measure of GDP. (ii) We use a new dataset of GDP based on the Defense Meteorological Satellite Program's Operational Linescan System (DMSP-OLS) nighttime light imagery as a proxy for the development level, and using these data, which are less prone to the measurement errors in the System of National Accounts statistics, we find evidence for the existence of an Environmental Kuznets Curve for CO2 emissions. (iii) We apply a U test that confirms that the estimated extreme point is within our data range. The evaluated turning point, beyond which CO2 emissions start to fall as income rises, is considerably lower than earlier studies show, and thus, our results provide more optimistic prospects of the possible environmental benefits of economic growth.