Journal of Korea Trade

Korea Trade Research Association (한국무역학회)
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Comparing Production- and Consumption- based CO2 Emissions by Economic Growth

  • Jooman Noh (Department of Economics, Dankook University) ;
  • Hong Chong Cho (Department of Economics, Dankook University)
  • Received : 2022.06.07
  • Accepted : 2022.12.02
  • Published : 2022.12.31
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Abstract

Purpose - Carbon emission standards are based on the "production-based carbon emissions" generated by the production of goods in the relevant country which were the existing measurement methods. However, can such carbon emissions measurement standards be established international? For example, some of the goods produced in developing countries are produced for the demand of developed countries. The method of measuring carbon emission based on the final demand of a certain country is called "consumption-based carbon emissions." This study compares productionand consumption-based CO2 emissions according to economic growth in ninety-three countries categorized by income level. Design/methodology - Our empirical model considers the difference between production- and consumption-based CO2 emissions according to economic growth. Also, our model investigated whether the EKC hypothesis in most of the previous studies that had been based on production-based emissions was also established in the consumption-based emission model. Considering the continuous characteristics of CO2, we utilized the generalized method of moments (GMM), specifically a system GMM econometric technique because CO2 in the previous period can affect CO2 in the present period. Findings - Our main findings can be summarized as follows: The results show that for the consumption-based CO2 emissions model, CO2 continuously increases as economic growth increases in the upper-middle income countries. The inverted U-shaped result was found in the case of the production-based model. However, in the lower-income countries, an inverted-U shape in which CO2 emissions decrease at some point as the economy grows in the production-based model does not appear. On the other hand, in the consumption-based model, an inverted U-shaped result was obtained when estimating with system-GMM. Additionally, the proportion of manufacturing, energy imports, and energy consumption had an effect on both the production- and the consumption-based model regardless of the group's CO2 emissions. On the basis of such assessments, policymakers need to consider not only production- but also consumption-based options. Originality/value - Previous studies have mainly focused on production-based CO2 emissions, with most of them revolving around economic growth or the effect of various social and economic factors on CO2 emissions. However, this study considers the relationship with economic growth using consumption-based emissions as a dependent variable by classifying ninety-three countries by income level.

Keywords

Acknowledgement

The present research was supported by the research fund of Dankook University in 2022

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