Are greenhouse gas emissions converging in Latin America? Implications for environmental policies

Abstract

This paper investigates greenhouse gas emissions convergence among nineteen Latin American countries, for the period 1970 to 2018. To that end, we use the Phillips–Sul methodology to examine whether these countries have followed an absolute convergence process, or whether there has been a club convergence process. Our results offer important insights into the greenhouse gas emissions catch-up exhibited by several countries, and do not support the hypothesis that all countries of the Latin American region, taken together, converge to a single equilibrium in greenhouse gas emissions intensity. We find strong evidence of subgroups that converge to different steady states. An iterative testing procedure reveals the existence of different patterns of behavior and shows that such emissions are not uniform across these countries. We also estimate an Ordered Logit Model to identify the forces underlying the creation of clubs and the likelihood that any given country will be a member of any convergence club. Estimates from an Ordered Logit Model reveal that income, population density, openness, natural resources rents, and – particularly – the level of corruption, play a crucial role in explaining the formation of convergence clubs. The existence of clubs means that the climate policies aimed at reducing emissions should consider the specific characteristics of the countries, according to the club convergence results.