Convergence of CO2 emissions in countries at different stages of development. Do globalisation and environmental policies matter?

Abstract

Our study compares the convergence of CO2 emissions in countries at different stages of development based on two measures of CO2 emissions (production and consumption approach). It examines the effect of globalisation and environmental policy stringency on CO2 emissions convergence. We employ panel data from 38 countries from the period between 1992 and 2019 and apply the DCCE-MG model. The results reveal absolute convergence, which means that countries at different stages of development converge differently, as well as conditional convergence in both developed and developing economies, although it is faster in latter. The most important finding is that convergence alone is insufficient to positively assess climate policies implemented in particular countries, as in developing countries average CO2 levels increase relatively rapidly, whereas in developed countries they decrease slowly. The analysis of the determinants indicates that the CO2 convergence process in developing countries – unlike in developed countries – is significantly influenced by more stringent environmental policies and increasing globalisation, while renewable energy consumption and industrialisation do not exert any impact on this process. The impact of GDP levels is ambiguous. Moreover, the impact of globalisation depends on the measure of CO2 emissions, and this relationship is stronger in consumption emissions than in production ones.