The role of globalization in CO2 emissions: A semi-parametric panel data analysis for G7

Abstract In order to provide flexible and comprehensive results about the relationship between globalization and CO2 emissions for the G7 countries, we introduce the KOF globalization index into traditional Stochastic Impacts by Regression on Population, Affluence and Technology model, and conduct the empirical analysis by applying a semi-parametric panel fixed effects model. The data covering the period of 1970–2015 consists of CO2 emissions, KOF globalization index, renewable energy consumption and GDP. Our results indicate that the relationship between globalization and CO2 emissions are inverted U-sharped, which strongly support the Environmental Kuznets Curve hypothesis. Furthermore, an increase of economic output is associated with statistically significant growth in CO2 emissions. On the contrary, an increment of renewable energy consumption lowers CO2 emissions. Related policy proposals are then offered according to our empirical results.