Aspects of Governance and CO2 Emissions: A Non-linear Panel Data Analysis

Abstract

The reduction of CO2 emissions has been at the centre of worldwide debates on environmental issues, though its inclusion as one of the millennium development goals (MDGs) by the United Nations has changed the focus of relative literature. Among many, one of the World Bank’s “recipes” to achieve a higher position toward MDGs has been to undertake reforms for a better governance. While, the majority of researches’ focus has been on one single aspect and its relationship with the environment, some studies, have simultaneously considered two governance dimensions. In this paper, we focus on the role of several aspects of governance on CO2emissions. This provides us with a chance to explore the possible impacts of all aspects of governance on a more direct measure of emissions that is different to previous researches which have focused on the indirect transmission and considered the maximum of two. Using the IV method within panel data analysis, we show that only one single aspect of governance, Control of Corruption, has a negative significant effect on CO2emissions and its effect has a non-linear relationship. The non-linearity exists in both parametric and nonparametric analysis after controlling for endogeneity.