Environmental Consequence of Transportation Sector for USA: The Validation of Transportation Kuznets Curve

This paper explores the relationship between transportation infrastructure and CO2 emissions by incorporating business cycle, transportation energy consumption and oil prices in carbon emissions function for the U.S. economy using monthly data for the period of 2000M1-2017M12. We have applied ADF unit root test accommodating structural breaks in the series developed by Kim and Perron (2009). We have applied bounds testing approach to cointegration developed by Pesaran et al. (2001) to examine cointegration between the variables. The empirical results confirm the existence of cointegration relationship between the variables. Moreover, transportation infrastructure decreases carbon emissions. Business cycle impedes environmental quality by increasing carbon emissions. Transportation energy consumption is positively linked with transportation carbon emissions but oil prices decrease it. Inverted U-shaped Transportation Kuznets curve (TKC) is found between transportation infrastructure and carbon emissions. The relationship between business cycle and CO2 emissions is an inverted-U shaped validating the environmental Kuznets curve (EKC). The causality analysis reveals the presence of feedback effect between transportation infrastructure and CO2 emissions. Similarly, economic activity causes carbon emissions and in resulting, carbon emissions cause business cycle i.e. bidirectional causality. These empirical findings show new policy directions for using transportation infrastructure as economic tool to achieve growth along with sustainable environment.