Do Political Institutions Moderate the GDP-CO2 Relationship?

Abstract

Empirical studies of the relationship between GDP per capita and country-level CO2 emissions tend to focus on the direct effect of per capita GDP growth, rarely taking political institutions into consideration. This paper introduces theoretical insights from environmental political science research, which suggests that CO2 emission models would gain explanatory leverage if moderators gauging political institutions were considered. We test these theories by estimating the potentially moderating effects of democracy, corruption, number of veto points and players, and civil society activity. We find that the per capita CO2 elasticity of GDP becomes non-monotonic and diminishing as GDP per capita increases in countries with democratic non-corrupt governments and high civil society participation. The moderating impact of this political-institutional configuration is relatively small, suggesting only limited support for theories in environmental political science. However, the results are robust and add an important specification to the studies in environmental economics that find positive and monotonic GDP-CO2 relationship: the adverse effect of GDP per capita on CO2 emissions is not profound in rich well-governed countries with active civil societies.