engleski

From the uncertainty perspective: Does the economy affect carbon dioxide emissions?

Adverse climate change and environment degradation are a major threat to economies and the wellbeing of each citizen. Carbon dioxide is a crucial element that affects climate change through the greenhouse effect. Therefore, one of the main climate goals for the world leaders should be sustainable levels of carbon dioxide emissions. Four factors that have an impact on the total energy-related carbon dioxide emissions are energy intensity, carbon intensity, gross domestic product (GDP) per capita, and population, which are all known under a common name as the Kaya identity. This paper starts from the macroeconomic standpoint, i.e., analyses the previous scientific findings regarding the relationship between GDP per capita and carbon dioxide emissions. Previous studies have shown an existing relationship between the United States (US) GDP and carbon dioxide emissions. Likewise, GDP is affected by behavioural variables like economic policy uncertainty. The US is the second largest emitter of carbon dioxide, right after China. The main focus of this paper is to analyse the uncertainty factors behind carbon dioxide emissions in the US. Uncertainty factors that we include in this study are the economic policy uncertainty index and climate policy uncertainty index. We start our analysis from a standpoint that at different levels of uncertainty indicators the strength of the analysed relationship could differ. Therefore, we base our analysis on the discrete threshold regression with unknown thresholds that encompasses nonlinearities and dynamics into the model, and decision tree model. For our threshold model specification, climate policy uncertainty has been chosen as a threshold variable with two separate regimes. The first regime includes values of climate policy uncertainty lower than 70.34, while the second contains climate policy uncertainty figures higher than the threshold value of 70.34. The uncertainty indicators have a significant impact on the carbon dioxide emission, depending on the climate policy uncertainty regime. At lower levels of the climate policy uncertainty index (below 70.34), economic policy uncertainty does not have a significant impact on the dependent variable, while climate policy uncertainty has, no matter the economic policy uncertainty regime. Although, the estimated coefficient changes depending on the analysed regime. These results are in accordance with the theoretical expectations that climate policy uncertainty has a strong and negative effect on carbon dioxide emissions. This relationship is valid regardless of the level of climate policy uncertainty. Although, the effect is even stronger at lower levels of climate policy uncertainty. Further, it is expected that primary energy consumption influences the level of carbon dioxide emissions. Our study finds that at low uncertainty levels, primary energy consumption has a stronger effect on the carbon dioxide emissions than in the contrary case (when climate policy uncertainty is higher than 70.34). This speaks in favour of uncertainty variables in a manner that at higher uncertainty levels, the conventional variable that determines the carbon dioxide emissions (primary energy consumption) has less influence on carbon emissions than in the case of low uncertainty levels. Additionally, the decision tree model shows that at constant primary energy consumption, higher economic and/or climate policy uncertainty leads to lower carbon emissions, and vice versa.

economic policy uncertainty ; climate policy uncertainty ; carbon dioxide emissions ; threshold regression

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