The role of globalization in CO₂ emissions: A semi-parametric panel data analysis for G7

In order to provide flexible and comprehensive results about the relationship between globalization and CO₂ emissions for the G7 countries, we introduce the KOF globalization index into traditional Stochastic Impacts by Regression on Population, Affluence and Technology model, and conduct the empirical analysis by applying a semi-parametric panel fixed effects model. The data covering the period of 1970-2015 consists of CO₂ emissions, KOF globalization index, renewable energy consumption and GDP. Our results indicate that the relationship between globalization and CO₂ emissions are inverted U-sharped, which strongly support the Environmental Kuznets Curve hypothesis. Furthermore, an increase of economic output is associated with statistically significant growth in CO₂ emissions. On the contrary, an increment of renewable energy consumption lowers CO₂ emissions. Related policy proposals are then offered according to our empirical results.