Long-run Convergence in Greenhouse Gases, Reactive Compounds, Aerosol Precursors and Aerosols: An Application of Panel Analysis of Nonstationarity in Idiosyncratic and Common Components to OECD and BRICS Countries

Abstract

This book analyzes the existence of stochastic and deterministic convergence of ten series of greenhouse gases, aerosol precursors, reactive gases and aerosols in 29 industrialized and emerging countries over the period 1820-2018. Towards that end, we apply a large battery of second-generation panel unit root and stationarity tests, all robust to the presence of cross-sectional dependence. Overall, their implementation fails to provide clear-cut evidence of convergence dynamics in the cases of both stochastic and deterministic convergence. However, there are some caveats associated with the application of these procedures, which are addressed with the implementation of Panel Analysis of Nonstationarity in Idiosyncratic and Common components (PANIC). This analysis applied to stochastic convergence provides strong evidence of convergence patterns in the series of log per capita black carbon, carbon monoxide, ammonia, non-methane volatile organic compounds and nitrogen oxides emissions, as given by the existence of pairwise cointegration among individual series, as well as weaker evidence of convergence in per capita carbon dioxide, nitrous oxide and organic carbon emissions (which exhibit two common stochastic trends) and yet weaker evidence of convergence in per capita methane emissions (which exhibit three common stochastic trends). Concerning the analysis of deterministic convergence, we provide strong evidence of convergence in per capita black carbon, carbon monoxide, ammonia, non-methane volatile organic compounds, nitrogen oxides and sulfur dioxide emissions, and to a lower extent in per capita carbon dioxide, nitrous oxide and organic carbon emissions, and even weaker evidence of deterministic convergence in per capita methane emissions. Several important environmental policy implications result from the evidence of deterministic convergence in emissions.