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The environmental Kuznets curve by considering asymmetric oil price shocks: evidence from the top two

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Abstract

This study is the first attempt to investigate the validity of the environmental Kuznets curve (EKC) hypothesis by considering the asymmetric oil price effects on the CO2 emission in the USA and China. The oil prices were incorporated as an indicator (proxy) of energy consumption in order to avoid potential endogeneity problems and allow exploring the asymmetric effects of the energy fluctuation on the CO2 release. The nonlinear autoregressive distributed lag (NARDL)–bound testing approach to cointegration of Shin et al. (2014) in the presence of structural break is used to identify both short-run and long-run dynamic relationships between real oil prices, per capita GDP, and per capita CO2 emissions over the period 1976–2013. The results indicate that the inverted U-shaped EKC hypothesis is not supported in the short and long terms in both countries. Asymmetric findings suggest that positive and negative fluctuations in crude oil prices affect CO2 emissions differently in the USA and China. Unlike China, rising energy prices in the USA could be a contributing factor in the fight against pollution. More taxation of fossil energy and renewable energy subsidies are recommended for the American economy. However, the growth priority seems to outweigh the environmental issue for the Chinese economy.

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Notes

  1. Theoretical considerations on which the Kuznets curve hypothesis is based, as detailed by Jaunky (2011) and Kaika and Zervas (2013), are summarized by the three effects: the income effect, the structural effect, and the abatement effect.

  2. Nevertheless, the process studied should not include the I (2) series.

  3. These results allow ensuring the application plausibility of the ARDL bound technique, given that none of the series is integrated of order greater than 1.

  4. If the EKC hypothesis had been verified in one of the two countries considered, the turning point estimation would have been of the order of \( \widehat{\mathrm{GDPO}}=\exp \left(-\frac{\widehat{\beta_6}}{2\widehat{\beta_7}}\right). \)

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  1. Ecole Supérieure de Commerce de Tunis, Université de la Manouba, Manouba, Tunisia

    Talel Boufateh

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Boufateh, T. The environmental Kuznets curve by considering asymmetric oil price shocks: evidence from the top two. Environ Sci Pollut Res 26, 706–720 (2019). https://doi.org/10.1007/s11356-018-3641-3

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