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Working paper

Discrepancies between Environmental Kuznets Curves for Production- and Consumption-based CO2 Emissions

This paper analyzes the patterns of CO2 emissions for a sample of 144 countries in the period from 1992 to 2013. Environmental Kuznets curve (EKC) hypothesis was tested with the help of econometric analysis for both production- and consumption-based emissions. The relationship between incomes and emissions was also examined at the level of leading national economies. The results show important distinction: while there is some evidence of decoupling between economic growth and the growth of production-based emissions at the higher level of income, consumption-based emissions continue to grow with rising incomes even in the richest countries. The further investigation is devoted to discrepancies between production and consumption EKCs which are determined by emissions embodied in international trade. Structural decomposition analysis was applied to define the contribution of different factors to the change in emissions embodied in trade with the rise of GDP per capita. While structural and technological factors are dominant in explaining this change at the low and middle level of income, the effect of volume of trade plays the key role in evolution of emissions embodied in trade in high-income countries.