Do country risks influence carbon dioxide emissions? A non-linear perspective

This study explores the non-linear effects of real income, energy use, and country risks on carbon dioxide (CO2) emissions in a panel of 111 countries from 1985 to 2014. By applying the panel smooth transition regression model, we find that real income, energy use, and country risks have different impacts on CO2 emissions when using country risks as thresholds. As to the full sample, the results show an inverted U-shaped relationship between CO2 emissions and economic risk, and that the financial and political risk indices have monotonically increasing effects on CO2 emissions. As country risks decrease, the positive effects of real income and energy use on CO2 emissions are first large and then become small. Moreover, with country risks changing, low-income countries have larger sensitivities to CO2 emissions. (C) 2020 Elsevier Ltd. All rights reserved.