Economic Freedom and the CO2 Kuznets Curve

32 Pages Posted: 31 Jan 2020

See all articles by Christian Bjørnskov

Christian Bjørnskov

Aarhus University - Department of Economics and Business; Research Institute of Industrial Economics (IFN); Center for Political Studies; Institute for Corruption Studies

Date Written: January 8, 2020

Abstract

Most politicians and international organisations advocate for increased regulation and government control of industry in order to handle climate change and reduce overall CO2 and greenhouse gas emissions. However, it remains an open question how economic freedom is associated with environmental damage and whether deregulation is harmful to the environment or incentivises the use of green technology. On one hand, more government control and regulation may force firms and individuals to reduce their emissions. On the other hand, more economic freedom is likely to enable innovation and the adoption of green technological development. In this paper, I therefore combine data on growth in CO2 emissions and GDP per capita with the Fraser Institute’s Economic Freedom of the World indices in order to test if economic freedom affects emissions. I do so in the context of estimating a standard Environmental Kuznets Curve in which economic freedom can both reduce overall levels as well as shift the shape of the curve. The results suggest that economic freedom reduces overall CO2 and greenhouse gas emissions but also shifts the top point of the Kuznets Curve to the left. Part of this effect may be due to the effect of economic freedom on the adoption of renewable energy.

Keywords: economic freedom, environmental performance, greenhouse gases, Kuznets Curves

JEL Classification: H23, O31, P16, Q55

Suggested Citation

Bjørnskov, Christian, Economic Freedom and the CO2 Kuznets Curve (January 8, 2020). Available at SSRN: https://ssrn.com/abstract=3508271 or http://dx.doi.org/10.2139/ssrn.3508271

Christian Bjørnskov (Contact Author)

Aarhus University - Department of Economics and Business ( email )

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Aarhus V, DK-8210
Denmark

Research Institute of Industrial Economics (IFN) ( email )

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Stockholm, SE-102 15
Sweden

Center for Political Studies

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Copenhagen K, DK-1301
Denmark

Institute for Corruption Studies

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Normal, IL 61790-4200
United States

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