IS AN AGING POPULATION GOOD OR BAD FOR THE ENVIRONMENT? PANEL EVIDENCE FROM 25 OECD COUNTRIES

Abstract

Although CO2 emissions are purely global externalities and unlikely to be addressed by individual countries, empirical attention has typically been on the national level as national efforts have come in to plug the gap. The contribution of this study is therefore to investigate the effect of population aging on CO2 emissions, controlling for income and fossil fuel energy consumption, using panel data of 25 OECD countries during 1980–2015. After applying the panel cointegration approach such as fully modified ordinary least squares (FMOLS) and dynamic ordinary least squares (DOLS), we discover that population aging appears to reduce CO2 emissions, ceteris paribus. We also confirm the existence of the environmental Kuznets curve (EKC) relationship with an inverted-U curve, where CO2 emissions increase with income level until it reaches the estimated turning point and then starts to turn down. Other evidence shows that fossil fuel energy consumption increases CO2 emissions, other things equal. We believe that these findings present sustainable policy directions that may help solve the problem of population aging our world is dealing with today.