Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/249963 
Year of Publication: 
2021
Series/Report no.: 
Working Paper No. 028.2021
Publisher: 
Fondazione Eni Enrico Mattei (FEEM), Milano
Abstract: 
The standard approach to the Environmental Kuznets Curve (EKC) holds that as a country develops and GDP per capita grows environmental degradation initially increases but eventually it reaches a turning point where environmental degradation begins to decline. Environmental degradation takes many forms, one of them being emissions of harmful gases. According to the EKC concept, a country can reduce emissions by ‘growing’. The standard approach implicitly assumes that a country emits as little as possible for its economic development, whereas in reality, a country might emit above the best attainable level of emissions. Therefore, emissions could be reduced before and after the turning point by becoming more environmentally efficient – i.e., ‘improving’ the emissions level. This article proposes a Stochastic Environmental Kuznets Frontier (SEKF) which is estimated for CO2 emissions for OECD countries and used to benchmark each country before and after the turning point differently, thus, indicating how a country could ‘grow’ and/or ‘improve’ to reduce its CO2 emissions. Additionally, we analyse the role of the stringency of environmental policies in reducing a country’s carbon inefficiency measured by the distance from the benchmark EKC and find widespread carbon inefficiencies that could be reduced by more stringent market-based environmental policies.
Subjects: 
Environment and growth
Environmental Kuznets Curve
CO2 emissions
Panel data
OECD countries
Stochastic frontier approach
Stochastic Environmental Kuznets Frontier
Environmental Policy Stringency
JEL: 
O44
Q56
Q54
C13
C33
Document Type: 
Working Paper

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