The Environmental Kuznets Curve across Australian states and territories

Abstract

We test the Environmental Kuznets Curves (EKC) hypothesis for a panel of eight Australian states and territories using non-parametric panel estimation over the period 1990 to 2017. A feature of our non-parametric estimation method is that it allows carbon dioxide (CO2) emissions to evolve over time in the form of an unknown functional form with confidence bands constructed using a wild bootstrapping method. This framework has the advantage that we can plot the time-varying relationship between Gross State Product (GSP) and CO2 emissions. The non-parametric local linear estimates for GSP are consistent with a conventional inverted U-shaped EKC, which peaks in 2010 and declines thereafter. The peak coincides with a significant policy shift in Australia's commitment to reducing CO2 emissions, whereby, in 2010, the Australian Government, and subsequently the states and territories, pledged to reduce CO2 emissions to 5% below 2000 levels by 2020 under the United Nations Framework Convention on Climate Change (UNFCCC) (the Cancun Agreement).