Comparison of the Relationship Between CO2, Energy USE, and GDP in G7 and Developing Countries: Is There Environmental Kuznets Curve for Those?

The increasing attention to greenhouse gas (GHG) emission all around the world has led researchers to investigate its causes. Energy use and economic growth can be categorized as the most important roots for this problem. The objective of this study is to investigate the causal relationship between energy use (EU), economic growth (GDP), and CO2 emission within two groups of countries: The G7 and the developing countries. Then, we examined the environmental Kuznets curve for these countries to see whether this hypothesis (EKC) is proved for these countries or not. To do so, seven developed and six developing countries are selected, and the annual data samples covering the period between 1993 and 2011 are gathered. To investigate the casual relationship between the variables, EU, GDP, and CO2, we applied the techniques of panel data analysis, examining unit root and cointegration tests, based on EKC equation. The results show the casual and long-term relationship for the two groups of countries. Also, the hypothesis of Kuznets curve is proved for G7 countries and it is shown that the relationship between these variables is inverted U shaped, with a nonzero negative coefficient for the square of GDP. However, for developing countries, this hypothesis is rejected, because the coefficient of GDP2 is found close to zero, and thus, a linear relationship is proved between these variables.