Revisiting the environmental kuznets curve hypothesis in 208 counties: The roles of trade openness, human capital, renewable energy and natural resource rent

Abstract

Achieving carbon neutral requires a comprehensive understanding of the effect of different key factors on carbon emissions. To this end, this study investigates the effect of trade openness, human capital, renewable energy and natural resource rent on carbon emissions within the framework of the environmental Kuznets curve (EKC) hypothesis. Second-generation econometric tests, Generalized Method of Moments and Fully Modified Ordinary Least Squares estimator were developed based on the aggregated dataset of 208 countries from 1990 to 2018. The results show that (i) the EKC hypothesis is validated when the effects of trade openness, human capital, renewable energy consumption, and natural resource rents are considered. The relationship between income level and carbon emissions shows an “inverted U-shaped” curve at the global level. Besides, the real GDP per capita corresponding to the EKC turning point is 19,203$. (ii) Renewable energy consumption and human capital have heterogeneous effects on carbon emissions in before- and after-EKC turning points. Specifically, renewable energy consumption has a better emission reduction effect for countries before the EKC turning point, with effects of −0.4334 and −0.1598, respectively; human capital has a better emission reduction effect for countries after the EKC turning point, with effects of −0.6311 and −0.3398, respectively.(iii) the mitigation effect of trade openness on carbon emissions is only effective in countries with weak decoupling after EKC turning points, with a mitigating effect of −0.0615. However, natural resource rents increase carbon emissions in most countries.