Effects of primary energy consumption on CO2 emissions under optimal thresholds: Evidence from sixty countries over the last half century

Abstract

We examine how different types of primary energy consumption (i.e. oil, coal, gas, hydroelectric and other renewables) contribute to carbon dioxide emissions (CO2) in the world. We allow the effects of each energy source on emissions to vary according to countries' real income or total emission levels. To achieve this, we use a panel breaking regression with four endogenously determined break points, employing time series (1965–2016) data across 60 major pollutant countries with over 2600 observations. Our analysis distinguishes between five optimally-determined country groupings at differing stages of industrialization, technology and scale, in terms of how they generate emissions from different fossil fuels. Our findings suggest that there exist different trade-offs from switching from one primary fuel source to another at different income levels and highlight how significant fuel-specific gains can be made by using other comparable economies as benchmarks.