National Seminar in Birla Global University

BIRLA GLOBAL UNIVERSITY,BHUBANESHWAR

NATIONAL SEMINAR HOSTED BY DEPARTMENT OF ECONOMICS

   ON 

INDIAN ECONOMY:EMERGING ISSUES AND CHALLENGES FOR SUSTAINABLE DEVELOPMENT

23-24 NOVEMBER,2018

Decoupling per capita CO₂ emission from GDP per capita in South Asia and Euro Area:Panel Data Analysis

Dr.Debesh Bhowmik

Abstract

In this paper author analysed decoupling per capita CO₂ emission from per capita GDP in Euro Area and South Asia during 1991-2017. To find the relationship between per capita CO₂ emission in metric ton and GDP per capita  in US$ in current prices during 1991-2017, author used fixed effect panel regression model after verifying the Hausman Test(1978) taking decoupling model. Fisher (1932)-Johansen cointegration test (1991) was used to show cointegration. Johansen (1991) Panel VECM was also used to show long and short run association between CO₂ emission and GDP where Wald test(1943) was verified in the system equations.Data of per capita CO₂ emission in metric ton and GDP per capita in US$ in current prices for Euro Area and South Asia from 1991 to 2017 were taken from the World Bank.

 The paper concludes that the fixed effect panel regression analysis showed that there is absolute decoupling in income elasticity ,no decoupling in square of income elasticity , absolute decoupling cubic income elasticity, and relative decoupling in income elasticity to the power four respectively during 1991-2017 in Euro Area and South Asia. Fisher-Johansen panel cointegration test confirm two cointegrating equations both of which are moving to equilibrium but one is significant.There is a long run association between per capita CO₂ emission and cubic function of per capita GDP of South Asia and Euro Area during 1991-2017.The speeds of adjustment of error corrections are 8.86% and 161.6% per annum respectively. There is no short run association between per capita CO2 emission and per capita GDP in different order. In VECM, in income elasticity of the two period lag there is absolute decoupling which is decreasing. Square of Income elasticity of two periods lag ensure relative decoupling which is dwindling. Lastly, cube of income elasticity of two period lag confirm absolute decoupling whose value is also falling. These imply that the relation between per capita CO₂ emission and GDP per capita in South Asia and Euro Area during 1991-2017 satisfy EKC hypothesis. 

Key words—per capita CO₂ emission, GDP per capita, decoupling, panel cointegration, panel VECM,short run causality,long run causality

JEL code classification----- C14,C23,C32,Q01, Q38, Q43,Q52,Q53,Q5

The paper concludes that the fixed effect panel regression analysis showed that there is absolute decoupling in income elasticity ,no decoupling in square of income elasticity , absolute decoupling cubic income elasticity, and relative decoupling in income elasticity to the power four respectively during 1991-2017 in Euro Area and South Asia. Fisher-Johansen panel cointegration test confirm two cointegrating equations both of which are moving to equilibrium but one is significant.There is a long run association between per capita CO₂ emission and cubic function of per capita GDP of South Asia and Euro Area during 1991-2017.The speeds of adjustment of error corrections are 8.86% and 161.6% per annum respectively. There is no short run association between per capita CO2 emission and per capita GDP in different order. In VECM, in income elasticity of the two period lag there is absolute decoupling which is decreasing. Square of Income elasticity of two periods lag ensures relative decoupling which is dwindling. Lastly, cube of income elasticity of two period lag confirm absolute decoupling whose value is also falling. These imply that the relation between per capita CO₂ emission and GDP per capita in South Asia and Euro Area during 1991-2017 satisfy EKC hypothesis.