Economic development and CO2 emissions: assessing the effect of policy and energy time events for advanced countries

This paper documents the structural differences that exist among advanced countries with regard to their long run carbon dioxide-income relationships. The application of intervention analysis to the framework of Environmental Kuznets curves shows that time related effects, namely structural breaks, have been predominantly relevant in explaining the eventual occurrence of `bell shaped curves' with significant turning points. We indeed present heterogeneity of effects when comparing advanced countries long run dynamics. The second oil shock in the 80's and the 1992 Rio convention are among the major underlying causes of temporal breaks. Thus, environmental policy can exert long run beneficial shocks to the energy-economic system. Evidence provides food for thought for the post Kyoto era policy making, just after the Rio+20 step. Market and policy shocks are likely to be dynamically interrelated, but generating mutually interactive effects in the way the system `adapts' and reacts to changing (pricing) conditions over time.