Carbon dioxide emissions and institutional factors in developing nations: An application of the GMM technique

Abstract

Thirty-seven (37) industrialized countries are committed to cut greenhouse gases by 5.2% over a period since 2008-2012. However, understanding the needs of developing countries and their commitment towards social and economic development goals, UNFCCC has somehow adopted a principle of “common but differentiated responsibilities Economic activities are fundamentally linked to economic growth which is much needed in these nations, thus the parties allow them to grow to meet their ends. But this does not mean the countries should not be responsible for their action. These nations signatory to the Kyoto Protocol has also demanded them to put effort to cut carbon emissions. This study employed a dynamic panel data model that based on the Arellano and Bond Generalized Method of Moments (GMM) technique to investigate the impact of the Kyoto Protocol and four institutional factors political stability, property rights, corruption and freedom of trade on per capita CO2 emissions in 126-developing nations. Three determinants i.e. Kyoto Commitment, Kyoto Clean Development Mechanism and freedom of trade were found to have negative significant effect on CO2 emissions. Thus, the empirical findings confirm that the three institutional factors are relevant in cutting the CO2 emission.